Oil spikes to more than 2-year high following pipeline explosion in Libya
- Crude oil traded at the highest level since mid-2015 following a report of a pipeline explosion in Libya.
- Trading volume is thin due to the Christmas holiday.
Crude oil traded at its highest level since mid-2015, supported by an explosion on a crude pipeline in Libya and voluntary OPEC-led supply cuts.
The move towards restart of a key North Sea pipeline, Forties, capped the rally. The pipeline is being tested after repairs and full flows should resume in early January, its operator said on Monday.
Brent crude, the international benchmark for oil prices, rose $1.79, nearly 3%, to $66.83 a barrel at noon in New York. West Texas Intermediate Crude oil, the US benchmark, added $1.37 at $59.84.
"The confirmation that Forties is coming back ....has the potential for capping Brent," said Olivier Jakob, analyst at Petromatrix.
Trading activity was thin due to the Christmas holiday in many countries.
Oil turned positive following the explosion at the Libyan pipeline, which feeds the Es Sider terminal. It was not immediately clear what impact the blast will have on Libyan output, which has been recovering in recent months after being hampered for years by conflict and unrest.
Brent has risen 17% in 2017. The Organization of the Petroleum Exporting Countries, plus Russia and other non-members, have been withholding output since Jan. 1 to get rid of a glut.
The producers have extended the supply cut agreement to cover all of 2018.
Iraq's oil minister said on Monday there would be a balance between supply and demand by the first quarter, leading to a boost in prices. Global oil inventories have decreased to an acceptable level, he added.
That is earlier than predicted in OPEC's latest official forecast, which calls for a balanced market by late 2018.
While the OPEC action has lent support to prices all year, the unplanned shutdown of the Forties pipeline on Dec. 11 pushed Brent to its mid-2015 high.
Forties plays an important role in the global market as it is the biggest of the five North Sea crude streams underpinning Brent, the benchmark for oil trading in Europe, the Middle East, Africa and Asia.
Rising production in the United States is offsetting some of the OPEC-led cuts.
The US rig count, an early indicator of future output, held at 747 in the week to Dec. 22, according to the latest weekly report by Baker Hughes.
(Additional Reuters reporting by Henning Gloystein; Editing by Peter Graff and John Stonestreet)