News that the Forties North Sea pipeline has been shut down for several weeks after it was found to be leaking surprised crude oil markets and slightly nudged up prices on Monday to over $65 (€55) a barrel.

The pipeline carries the biggest volume of the five North Sea crude oil streams, making this a big loss no matter how short-lived. It delivers the main crude oil underpinning the Brent bechmark and is likely to be shut for weeks while repairs to an onshore section of the line are carried out. 

Owners and operators of the pipeline, Ineos, only acquired it from BP at the end of October. Contractors said they discovered a small hairline crack in the pipe near Netherely, south of Aberdeen, last week.

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"This is a significant outage as this pipeline supplies nearly 40 percent of the North Sea's crude which represents around 550,000 barrels per day," said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers.

A lifeline for OPEC?

At the same time the pipeline closure may provide some much-needed buttressing of the long suffering commodity. 

Ric Spooner, a Sydney-based analyst at CMC Markets, told Bloomberg News: "The relatively high global inventories will possibly cap any rally we have from here."

In 2016, OPEC struck a deal with Russia to reduce global crude output by 1.8 million barrels a day in an effort to halt the sliding price of oil, which hit a 13-year low in 2016 of $30 a barrel, down from a 2014 high of over $100 a barrel.

This deal, already once extended, is set to expire at the end of 2018 and traders are concerned that the Russia-OPEC output cap may be reviewed and lead to unexpected volatility. OPEC's next regularly scheduled meeting is in June 2018. 

On Tuesday, Brent crude futures rose another 38 cents to $65.07 a barrel, after jumping $1.35 on Monday. US crude futures added 26 cents ending up at $58.25 a barrel.

tr/aos (Reuters, AFP)