Oil prices rose and the global benchmark hit its highest level since 2015 Monday after the owner of a major European pipeline said it is shutting the system down for a period of weeks.
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Ineos, the British refining and chemicals company, said it would shut down the Forties Pipeline System for a "matter of weeks" after a hairline fracture discovered last week grew.
The outage raised the prospect of a supply shortfall and comes as the global oil market has already become tighter following nearly a year of production cuts by the Organization of the Petroleum Exporting Countries and other major producers.
Brent crude rose $1.29, or 2.03%, to $64.69 a barrel on ICE Futures Europe -- its highest level since June 2015. U.S. crude futures rose 63 cents, or 1.1%, to $57.99 a barrel on the New York Mercantile Exchange.
The pipeline system carries about 445,000 barrels of crude a day through the North Sea. Some of that crude is used to create the Brent crude benchmark.
The 235-mile pipeline systems connects 85 North Sea oil and gas assets to the U.K. mainland, amounting to about 40% of the U.K.'s North Sea oil and gas production.
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The outage could prompt more exports from the U.S. as European refiners scour the globe for crude to replace the lost North Sea output, said Andy Lipow, president of Lipow Oil Associates. Prices could remain elevated until it becomes clear how long the system will remain offline, he said.
"It's a significant supply disruption," he said. "This production is lost, and if refiners want to maintain their rates, they'll have to pull crude oil out of inventory somewhere in the world.
Oil prices have risen by around 30% over the past six months as efforts by OPEC and other producers to cut output have helped reduce global stocks.
Last month OPEC, along with other major producers including Russia, agreed to extend their production cuts by nine months to the end of 2018.
Still, higher prices are motivating those outside of the agreement to boost production.
"Despite the renewed OPEC commitment to rebalancing the market, our fundamental analysis shows moderate global stock builds going into 2018, and we expect the bullish momentum to fade," said analysts at Société Générale in a note published on Monday.
In addition, OPEC is set to re-examine its efforts when it meets in June, and signals from some members that the cuts could be phased out earlier if the market is rebalanced by June have weighed on prices at times.
Gasoline futures rose 1 cent, or 0.58%, to $1.7266 a gallon. Diesel futures rose 2.18 cents, or 1.13%, to $1.9506 a gallon.
Sarah Mcfarlane contributed to this article.
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(END) Dow Jones Newswires
December 11, 2017 16:07 ET (21:07 GMT)