HONG KONG • Global benchmark Brent crude jumped above US$65 a barrel for the first time in 21/2 years after one of the most important pipelines in the world was shut because of a crack.
Futures rose as much as 1.1 per cent in London, set for the highest close since June 10, 2015, after advancing 2 per cent on Monday.
It will take about two weeks to repair the small hairline crack after it was discovered on the North Sea Forties Pipeline System during a routine inspection, according to operator Ineos.
In the United States, crude stockpiles are forecast to drop for a fourth week, a Bloomberg survey showed, ahead of the release of government data today.
Oil is heading for a second yearly gain as the Organisation of Petroleum Exporting Countries and its allies, including Russia, extend supply cuts till the end of next year.
A strategy to exit the deal can be drafted in June next year if the market is no longer oversupplied by then, according to United Arab Emirates Energy Minister Suhail Al Mazrouei.
"If the market has some visibility on how long it's going to take to repair the pipeline, that removes some of the uncertainty and reduces the risk premium," said Mr Ric Spooner, a Sydney-based analyst at CMC Markets.
"The relatively high global inventories will possibly cap any rally we have from here."
Brent for February settlement rose as much as 70 US cents to US$65.39 a barrel on the London-based ICE Futures Europe exchange, and was at US$65.34 at 12.28pm Singapore time yesterday. Prices gained US$1.29 to US$64.69 on Monday. The benchmark traded at a premium of US$7.01 to February West Texas Intermediate (WTI), the highest level on a closing basis since May 2015.
WTI for January delivery climbed as much as 36 US cents, or 0.6 per cent, to US$58.35 a barrel on the New York Mercantile Exchange after rising 1.1 per cent on Monday. Total volume traded was about 41 per cent above the 100-day average.
The supplies that flow through the Forties Pipeline System are the single largest constituent part of so-called Dated Brent crude that helps to settle more than half the world's physical oil prices.
The shutdown forced Apache to suspend operations at its nearby Forties field.
BLOOMBERG
