Brent crude in London reached its highest since 2015 as a key North Sea pipeline shut down.
The Forties Pipeline System, one of the most important oil conduits in the world, is to be fully halted after a crack was discovered, the link’s operator Ineos said. The announcement boosted pricing that had been largely muted over the last week following an OPEC-led agreement by major producers to extend output curbs through the end of 2018. The Brent rally pulled New York futures up near $58/bbl.
At the same time, the UAE’s energy minister said Monday the group may draft a strategy in June to end the curbs if the market is no longer oversupplied. Brent, the global benchmark, rose as high as $64.71/bbl while West Texas Intermediate climbed to as high as $57.86/bbl.
“Brent is ripping,” said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York. “You really don’t have a lot of spare barrels before the supply situation becomes a problem.”
In addition, the WTI-Brent spread will “widen and encourage U.S. exports,” he said.
The pipeline system feeds crude to the Hound Point export terminal near Edinburgh in Scotland. At over 400,000 bpd, the supplies that flow through the link are the single largest constituent part of the Dated Brent grade that helps to settle more than half the world’s physical oil prices.
Brent for February settlement gained 99 cents to $64.39/bbl on the London-based ICE Futures Europe exchange. The global benchmark traded at a premium of $6.60 to February West Texas Intermediate, after touching $6.88.
OPEC may draft a strategy in June to end the curbs if the market is no longer oversupplied by then, the U.A.E.’s energy minister said Monday. Kuwait’s oil minister said Sunday that the group’s reduction-cuts may end earlier than 2019 if the market re-balances by June, signaling an optimistic outlook on market conditions next year.
There is the “expectation of tighter markets as 2018 unfolds,” Bart Melek, head of global commodity strategy at TD Securities in Toronto, said by telephone. “Certainly at Vienna, they’ve implied that they will be flexible. If the market rebalances, then we would expect somewhat looser rules.”
WTI for January delivery rose 36 cents to $57.72/bbl at 11:27 a.m. on the New York Mercantile Exchange. Total volume traded was about 11% below the 100-day average. Prices received a boost earlier as news broke of an explosion in New York.
Russia is keen to end output cuts as early as possible, Issam Almarzooq, the Kuwaiti oil minister who was replaced on Monday, said in Kuwait City on Sunday. OPEC will study an exit strategy at its next meeting in June, and prices should remain near current levels in 2018, Almarzooq said.
Source: World Oil