Oil prices on Tuesday jumped by one per cent to $65.24 a barrel, being highest since mid-2015, after the closure of the Forties North Sea pipeline knocked out significant supply from a market already tightening due to OPEC-led production cuts.
The last time the prices of oil (Brent crude) exceeded the $65-mark was in June 2015 when it traded at $65.49.
On Tuesday, Brent crude futures LCOc1, the international benchmark for oil prices, were at $65.32 a barrel at 07:48 GMT, up 63 cents, or one percent, from their last close. The contract hit a high of $65.70 a barrel earlier in the day.
Britain’s Forties oil pipeline, the country’s largest at a capacity of 450,000 barrels per day (bpd), was shut down on Monday after cracks were revealed. Its operators said that the pipeline could be shut down for weeks as they pursue repairs, adding that a hairline crack was discovered last week.
Meanwhile, United States West Texas Intermediate, WTI, crude futures CLc1 were at $58.38 a barrel, up 39 cents, or 0.7 percent, from their last settlement.
Market analysts who weighed in on the development said there was equally an oil price support from the consumer side.
In a note to clients, US bank Goldman Sachs said, “Demand growth across the commodity complex is extremely robust. And inventories across the complex have been declining sharply”.
“The market reaction shows that in a tight market, any supply issue will quickly be reflected in higher prices,” added ANZ bank.
The Organisation of Petroleum Exporting Countries, OPEC, had agreed on an output production cut to reduce the supply glut which led to a decline in oil prices.
Nigeria and Libya were exempted from the cuts due to crisis in the Niger Delta but the two countries are now signalling their intention to raise output next year.