Chineme Okafor in Abuja with agency report
Oil prices in the international market sustained their rally on Tuesday, with the Brent crude, the international benchmark for crude oil, trading at $65.24 a barrel, while U.S. West Texas Intermediate (WTI) crude futures traded at 58.21 dollars a barrel
The last time oil prices exceeded the $65-mark was in June 2015 when it traded at $65.49.
Reuters reported that Brent crude oil prices jumped above $65 per barrel after the closure of the Forties North Sea pipeline knocked out significant supplies from a market that was already tightening due to OPEC-led production cuts.
Britainâ€™s Forties oil pipeline, the countryâ€™s largest at a capacity of 450,000 barrels per day (bpd), was shut down on Monday after cracks were revealed.
Its operators said that the pipeline could be shut down for weeks as they pursue repairs, adding that a hairline crack was discovered last week.
â€œIt is a supply concern not only because the pipeline transports a significant portion of North Sea crude oil output, but also because it may take weeks before the issue is resolved,â€ Abhishek Kumar, Senior Energy Analyst at Interfax Energyâ€™s Global Gas Analytics, told Reuters.
Also, market analysts who weighed in on the development said there was equally an oil price support from the consumer side.
â€œDemand growth across the commodity complex is extremely robust. And inventories across the complex have been declining sharply,â€ said US bank Goldman Sachs, in a note to clients.
â€œThe market reaction shows that in a tight market, any supply issue will quickly be reflected in higher prices,â€ added ANZ bank.
The jump in Brent prices widened its premium to WTI prices, making U.S. oil exports more attractive.
OPEC and its allies started withholding supplies last January and currently plan to continue doing so throughout 2018.
However, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has expressed fears that a continuing rise in prices of oil could incentivise U.S. shale oil producers to ramp up production and perhaps derail the production cuts agreements reached by OPEC and its non-OPEC allies.
Kachikwu had told THISDAY at the recent meeting of the group in Vienna last month, where the decision was taken to extend the production cuts till the end of 2018, that he feared shale oil producers could ramp up production even though the price rise was good for Nigeria to fund its 2018 budget.