Oil hits two-year-and-a-half year high on pipeline shutdown

Oil prices jumped to their highest in more than two years on Tuesday after the shutdown of a North Sea pipeline knocked out significant supply from an already tightening market. Brent crude futures, the global benchmark for oil prices, rose above $65 a barrel — their highest since mid-2015 — after Britain’s Forties pipeline was shut due to cracks as a cold snap sweeps the country. The Forties pipeline is important for the global oil market because the crude it carries normally sets the price of dated Brent, a benchmark used to price physical crude around the world and which underpins Brent futures.

The shutdown comes as oil supply cuts by the Organisation of the Petroleum Exporting Countries (OPEC) have helped chip away an excess of inventories built up following a global supply glut which began to emerge in late 2014. “The disruption to Forties is not just about missing barrels, it is also about losing a key component for the main seaborne crude oil benchmark,” said Olivier Jakob, analyst at Petromatrix. U.S. crude oil futures CLc1 were last 0.7 percent higher at $58.41 a barrel. Prices of gas across Europe also soared following an explosion at Austria’s main gas transfer hub and as Russian gas

Meanwhile, the MSCI index of world equities .MIWD00000PUS, which tracks stocks across 47 countries, was flat after posting three straight days of gains. Wall Street futures indicated a positive open. ESc1 The jump in oil helped boost energy-heavy European stock indices, with the pan-European STOXX index rising 0.3 percent by afternoon in London. Europe’s oil and gas sector index hit its highest in a month. .SXEP Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS drifted off 0.3 percent, having bounced 2 percent in the past three sessions, with markets consolidating in the hope an upswing in global growth could outlast a likely hike in U.S. interest rates this week.

Commodity-linked currencies also got a boost from the pick up in oil prices. The Australian dollar and the New Zealand dollar were both over half a percent higher while the Norwegian crown rose 0.6 percent.

Reuters