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Kirkuk-Ceyhan pipeline blast: Crude oil price hits highest since 2014

Ceyhan Oil Pipeline Blast
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Following an explosion near the south-eastern Turkish province of Kahramanmaras on Tuesday January 18, Turkey’s State pipeline operator Botas claimed it had to cut oil flow through the Kirkuk-Ceyhan crude oil pipeline. The pipeline, which runs close to the Syrian border, transports oil from northern Iraq to Europe through the Mediterranean port of Ceyhan.

The pipeline carries over 450,000 barrels from northern Iraq into the Mediterranean port of Ceyhan (Turkey). The explosion sparked a massive fire, and authorities had to close a highway as a result. No causalities were reported.

On Wednesday January 19, the company had announced that crude flow through a broken pipeline connecting Iraqi energy reserves to international markets will be resumed. According to the Governor of the southern Kahramanmaras province, the explosion occurred after a power pylon fell on a pipeline during bad weather, triggering a fire.

However, the blast along the Kirkuk-Ceyhan link contributed to a seven-year peak in international crude oil prices. Oil futures gained more ground in electronic trading late Tuesday January 18, with U.S. benchmark prices near $87 a barrel.

Analysts anticipated this week’s drop to be around 1.367 million barrels. However, Brent crude prices settled up 93 cents or 1.1 per cent at $88.44 a barrel. The global benchmark hit $89.13, its highest level since October 13, 2014. U.S. West Texas Intermediate (WTI) crude futures settled $1.53, or 1.8 per cent higher at $86.96 a barrel, adding a 1.9 per cent gain on Tuesday. Based on front-month contracts, both WTI and Brent reached their highest settlements.

Traders also studied the International Energy Agency’s (IEA) carefully observed report released on Wednesday. The IEA raised its demand estimates for 2021 and 2022 by 200,000 barrels per day in its monthly oil market report.

However, concerns about supply have grown this week after Yemen’s Houthi group attacked the United Arab Emirates, the third-largest producer of the Organization of Petroleum Exporting Countries (OPEC). Meanwhile, Russia, the world’s second-largest oil producer, has increased its military presence along Ukraine’s border, raising worries of invasion and resulting supply shortages.

With the Omicron Coronavirus strain not cutting demand much and production concerns in Libya and Kazakhstan, global crude inventories are already reaching their lowest level since October 2019. The Turkey blast is expected to add to a growing list of concerns about tightening oil supply, which has already been worsened by interruptions in North America, Libya, and Kazakhstan. In addition, freezing weather is forecast to hit Texas in the coming days, creating a new threat to the oil supply.

OPEC+ which includes Russia and other producers, is also failing to meet a monthly output target of 400,000 barrels per day (BPD). OPEC officials and analysts have informed that the oil price might continue to rise in the coming months, reaching $100 a barrel.

However, based on strong demand and short-term supply interruptions, oil prices dropped on Thursday January 20 after hitting their highest levels since 2014, limiting losses as investors took profits.

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Reshma B.

Reshma Babu, a young Postgraduate in Mass Communication and Journalism from St. Aloysius College, Mangalore University, utilises her considerable learned journalistic knowledge and inherent story writing and sub-editing abilities to add value to the company’s media brands and the editorial team. All dimensions of human interaction are her prime focus.

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