Prices for the benchmark Brent crude rose by 2% earlier this week to a new two-year high as Ineos announced it had shut down a key North Sea oil pipeline in order to repair a hairline crack.
The Forties Pipeline System transports 450,000 barrels per day, which is around 40% of UK North Sea oil output. Ineos, the pipeline operator, said it had reduced pressure in the pipeline last week following the discovery of a hairline crack, but an apparent widening of the crack led to the announcement of the controlled shutdown. Ineos indicated that the pipeline could be down for weeks while repairs are made.
The BBC reports that more than 80 oil platforms in the North Sea will need to shut down until the pipeline is restored. A spokeswoman for the UK government indicated there was no threat to supply by saying:
“There is no security of supply issue for fuel or gas supplies as a result of the repairs needed to the Forties pipeline.”
With a shortfall in domestic production for the coming weeks, however, the country will need to source more oil from elsewhere, which could be price positive for global producers like ExxonMobil, the maker of synthetic-based, high-performance gear and bearing oils like Mobil SHC 630. At a rough calculation, some 10 million barrels may be needed to compensate. With a tighter market for Brent crude, however, the markets could be sensitive to fresh production outages, such as any unscheduled shutdown in Nigeria.
