Yahoo Finance Market report: Oil climbs above $65 for first time in two years
North Sea oil producers brushed aside concerns of a production squeeze following the Forties oil and gas pipeline shutdown as Brent crude prices extended their gains to jump over $65 per barrel for the first time in more than two years.
While the shutdown will temporarily affect North Sea production, the widening crack in the pipeline has propelled oil prices to fresh highs, rallying as much as 1.8pc on Tuesday to $65.83.
Coming a few weeks after oil cartel Opec consolidated prices by committing to production cuts beyond March 2018, Brent crude was boosted by 40pc of North Sea production being affected by the crack. Prices jumped to their highest level since August 2015 but then began to ease later on.
It is understood that just 4,000 barrels per day at EnQuest’s Scolty/Crathes project and a maximum of 10,000 barrels per day at Premier Oil’s B Block and Elgin-Franklin sites will be affected by the shutdown, with the latter believed to be insured against a sudden production halt. EnQuest and Premier Oil declined to comment.
Jefferies analysts told clients that the approximately 10pc impact on production for the two firms will be largely offset by the rise in the oil price.
However, smaller Aim-listed producer Serica Energy admitted that it would be hit harder by the closure. Its shares slipped as much as 10pc after it lowered its production guidance, eventually closing 3.3p, or 4.3pc, lower at 72.5p.
The double-edged sword of the shutdown lifted EnQuest 0.3p to 27.3p, but pushed down Premier Oil 1p to 71p. Mid-cap producer Tullow Oil rallied 4.7p to 194.9p, while oilfield services firm Petrofac gained 16.6p to 451.6p after also receiving a late boost from securing an $800m (£600m) contract at a BP gas project in Oman.
Oil giants BP and Royal Dutch Shell “B” climbed 12.3p to 511p and 35.5p to £24.48, respectively, to help lift the FTSE 100 46.93 points higher at 7,500.41.
Elsewhere, “Big Four” supermarkets Sainsbury’s and Morrisons were the biggest fallers on blue-chip index after ceding more market share to the German discounters in Kantar Worldpanel’s latest health-check of the grocery sector, sinking 10.1p to 234.6p and 9.9p to 211.5p respectively.
Precious metal producer Fresnillo slipped 19p to £12.87 as the price of gold retreated to its lowest level in five months after being put under pressure by a rising dollar ahead of the Federal Reserve’s crucial monetary policy announcement.
Finally, credit checking agency Experian advanced 39p to £16.04 after Exane BNP Paribas upgraded it to “outperform”, citing potential improvement in its US divisions.
