Oil prices have reached a two-and-a-half-year high after a hairline crack was found in one of the world’s most important oil conduits. The Forties Pipeline System, which carries 40% of North Sea oil and gas, is closing for repairs after the fault was found near Aberdeen, Scotland.
This pushed Brent crude to over $65 a barrel, which it hasn’t reached since June 2015.
Tom Crotty, Director of Ineos Group, which operates the Forties network, said that the pipeline’s closure is a “force majeure situation” that will prevent the operator from moving oil through the system for the next two weeks. He said that they will know in the “next few days” how long the system will be closed for. Although routine maintenance work on pipelines is common, closures related to cracks of this nature are not.
Oliver Jakob, an analyst at Petromatrix, a Swiss-based consultancy, said:
“It’s more than just a supply disruption because it’s more significant as a price maker. There’s one thing which is the volume of oil which is lost, but it’s also that it’s a key price benchmark.”
Also, according to McKinsey Energy Insights, the closure may benefit sellers the Middle East and Asia-Pacific region as buyers look at alternatives to the North Sea supply.
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