Brent crude prices have hit their highest level in 2.5 years, following the discovery of a crack in a major UK oil pipeline
- Oil at highest level since mid-2015
- Forties pipeline shut for several weeks, hitting production
- Full story: North Sea pipeline closure ‘could have significant impact on consumer
- Coming up: UK inflation figures for November
Tim Crotty, director of INEOS, is discussing the pipeline crack on Bloomberg TV now.
The cost of wholesale gas in the UK has jumped by almost 6% this morning, reports Reuters:
The impact of the Forties pipeline shutdown is ‘rippling through’ world energy markets, says Bloomberg.
That’s because the North Sea is a major oil supplier, and also because Brent crude is a key benchmark of energy prices.
The U.K. link is critical because flows through it make up the single largest constituent part of so-called Dated Brent crude, which helps settle more than half the world’s physical oil prices. It feeds the Hound Point export terminal near Edinburgh in Scotland and handles supplies from over 80 fields, and the shutdown forced Apache Corp.to suspend operations at its nearby Forties asset.
“It’s more than just a supply disruption because it’s more significant as a price maker,” said Olivier Jakob, an analyst at Petromatrix GmbH who’s based near Zug in Switzerland. “There’s one thing which is the volume of oil which is lost, but it’s also that it’s a key price benchmark.”
Reuters’ Alex Lawler reckons this is the first complete shutdown of the Forties pipe in around six years:
Brent crude trades above $65, first time since 2015, after unplanned Forties pipeline shutdown. We think the last time the pipeline had a complete shutdown was in 2011 due to an unexploded WW2 bomb being found nearby https://t.co/9V0nMtmrrG
The UK government has insisted that oil supplies won’t be affected by the Forties pipeline shutdown.
A spokeswoman said:
“There is no security of supply issue for fuel or gas supplies as a result of the repairs needed to the Forties pipeline.
The government will continue to liaise with industry operators to monitor the situation to ensure repairs are undertaken as quickly as possible.”
This should be an interesting Christmas challenge for Theresa May and her “Dixon of Dock Green” government;
Britain hits a massive cold snap … and the biggest pipeline shipping oil/gas/heating to the country is now shut down “for weeks”.
Can’t see a problem here …
The gap between Brent crude and US oil (WTI) has now widened to over $7 per barrel, a level last seen in August 2015, say analysts.
This shows that “supply disruptions can no longer be ignored in tight markets”, says Hussein Sayed, Chief Market Strategist at FXTM.
Here’s energy correspondent Adam Vaughan on the Forties pipeline outage
Fiona Legate, a senior analyst at Wood Mackenzie, said the shutdown of the Forties Pipeline System, even if only temporarily, would have wide-reaching implications the UK oil and gas industry. Apache, a Texas-based company with operations in the North Sea, said it had ceased production as a result.
The Health and Safety Executive said: “We continue to monitor the situation, as we have since we were made aware of the issues with the pipeline.”
The cost of Brent crude oil has hit its highest level since June 2015, after one of Britain’s most important oil pipelines was unexpectedly shut.
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