Here’s a story that will put some lift into world oil prices today, regardless of what happens to the value of the US dollar.
BP has shut a pipeline that carries 30% to 40% of the oil produced in the UK because of a strike at a refinery in Scotland that supplies power to the system. Gas from dual producing fields will also be stopped by the company because of the stoppage.
The strike is at the Grangemouth refinery: it provided electricity and steam to the North Sea’s Forties Pipeline System until 6 am Sunday, London time yesterday, when the system was shut by BP.
About 150 non-union workers will remain at the refinery to make sure it doesn’t break down or stop, which could be highly damaging and takes weeks to restart.
BP says that even if the refinery workers return to work today it will take several days to restart the pipeline system and nearby terminal.
Crude oil prices surged late Friday in New York on the prospect of the pipeline closing. The Forties Pipeline System ships about 700,000 barrels a day from more than 50 fields in the North Sea which will be forced to close as well.
Workers at the Grangemouth refinery are striking for two days over a dispute over pensions.
Petrol and other product supplies are reportedly short, especially in Scotland because Grangemouth supplies about 95 % of the fuel used in Scotland’s central belt, including its capital, Edinburgh, and biggest city, Glasgow.
The Scottish Government is importing around 65,000 tonnes of various fuels, including petrol and diesel, from European refineries to maintain supplies in the central region.
As a result of the news from Scotland and more unrest in Nigeria, Nymex New York light crude rose $US3.15 to $US119.21 a barrel late Friday before easing to close at $US118.52. In London Brent crude settled at $US116.34.
The rebels in Nigeria also claimed another attack on a Royal Dutch Shell pipeline in another incident in the campaign by the Movement for the Emancipation of the Niger Delta to sabotage Shell’s production in recent weeks.
A strike by workers at Exxon Mobil, Nigeria’s biggest foreign oil producer, has further disrupted production of around 200,000 barrels a day. (If the Forties Field is included, that makes around 900,000 to 1 million barrels a day of output affected by trouble.)
Oil hit a record high of $US119.90 a barrel on Tuesday on news of a flare up in tensions in Nigeria. Oil eased Thursday night, our time, and then kicked higher as trading in Europe and the US went on.
Gold ended a touch higher on Friday, rebounding from three-week lows as a sharp drop in a gold-backed exchange-traded fund put helped reverse the surge on the back of the stronger oil price.
Gold has fallen by around 15% from last month’s record high and sentiment is decidedly bearish, especially with the US dollar showing a sharp rally Thursday and early Friday against the euro, which injected a note of uncertainty.
This week’s attention will be on the Fed meeting and any rate decision and statement: any move to sit and not cut again will trouble commodity traders and prices, but Friday’s jobs report in the US looms as another major influence and any worsening in the unemployment rate and job losses will see gold and oil higher off the back of a falling US currency.
Spot gold fell as low as $US877.60 an ounce in New York and finished in the range, $US886.90/$US888.30. That was up around $US1.20 an ounce.
Comex June gold ended up 30c at $US889.70 an ounce.
Withdrawals of around 50 tonnes from the StreetTRACKS Gold Shares (the world’s biggest gold Exchange Traded Fund) to a five month low of 591 tonnes, worried investors.
New York copper rose on Friday, rising for the first week in three as stocks of the metal fell and industrial action in Chile continued to maintain speculation that production will be hurt.
Media reports from Chile said that employees at Codelco’s huge El Teniente mine in Chile walked off their jobs to protest insecure conditions created by striking contract workers who started a strike at three of the company’s four mines last week.
Comex July copper futures rose 3.6 USc to $US3.911 a pound: the metal was half a per cent higher over a week of indifferent trading.
The Codelco mines Andina and Salvador mines as well as El Teniente, have been affected by the strike. Codelco is the world’s largest copper producer.
Inventories in warehouses monitored by the Shanghai Futures Exchange dropped 12% last week, the second fall in a row, while London Metal Exchange stocks dropped 1.3% on Friday.
Copper jumped to a record $US4.045 a pound in New York on April 17, the day after the Coldeco industrial action started.
On the LME, three months copper rose $US50 to $8,575 a tonne on Friday. It’s up 9.1% in the past year.
