Pipeline closure helps oil prices recover

Closure at one of the major oil pipelines for Brent transport has confused the oil markets. The sudden closure has had analysts perplexed to say the least, with some saying it was one of the most significant unplanned crude oil shortages we have seen this year.

Britain’s biggest pipeline from the North Sea oil and gas fields is likely to be shut for several weeks in the coming months as repairs have already been started, according to the company release. The pipeline transports up to 450,000 barrels per day of Forties Crude. The said pipeline is extremely significant to Global Oil Supply and Oil Prices, it is one of the major pipelines that underpins the Brent benchmark prices.

The resulting effect of the closure has resulted in the widening of gap between Brent and WTI benchmark. The premium of Brent over WTI are currently highest since mod-2015.

Furthermore, on the supply side, UAE and Kuwait have signaled that OPEC is strategizing to exit from Cuts Agreement as early as June, 2018 given the oil prices sustain the current level or above.  The Ministers for respective countries informed that the said deal might end during 2018 if market conditions warrant.

Brent crude was up 64 cents, or 1 percent, at $63.98 a barrel by 0413 GMT. It had settled down $1.35, or 2.1 percent, on Tuesday on a wave of profit-taking after news of a key North Sea pipeline shutdown helped send the global benchmark above $65 for the first time since mid-2015.

U.S. West Texas Intermediate crude was up 42 cents, or 0.7 percent, at $57.56 a barrel, having settled the previous session down 85 cents.

Keeping in view the goals of Paris Agreement, the World Bank Group has announced that it will terminate funding to upstream oil and gas projects after 2019. However, the WBG also said that it will make exceptions for some of the poorest economies.