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Oil Price Fundamental Daily Forecast – Brent Could Spike to $67 to $70 a Barrel

U.S West Texas Intermediate and international benchmark Brent crude oil rallied on Monday with the latter leading the price surge. Brent crude spiked to its highest level in 2 ½ years on Monday on news that a major pipeline in the U.K.’s North Sea will shut down for repairs.

On Monday, January WTI crude oil settled at $57.99, up $0.63 or +1.10% and February Brent crude oil finished the session at $64.69, up $1.29 or +2.03%.

According to reports, the Forties pipeline system will close for several weeks while its operator, INEOS, repairs a crack in a pipe discovered last week. The pipeline is responsible for about 450,000 barrels a day of Forties crude from offshore fields in the North Sea to a processing plant in Scotland.

Brent Crude
Daily February Brent Crude

Forecast

INEOS’ decision to close the Forties pipeline came as a surprise and helped drive Brent crude prices higher than initially expected. Many crude oil traders had expected INEOS to keep the pipeline running at reduced rates while it repaired the crack.

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“Despite reducing the pressure the crack has extended, and as a consequence the Incident Management Team has now decided that a controlled shutdown of the pipeline is the safest way to proceed,” INEOS said in a statement on Monday.

According to CNBC, Forties crude is one of the several oil grades that sets the price of Brent. Today, the Forties Pipeline System transports about 40 percent of the U.K.’s North Sea output from more than 80 fields.

WTI Crude Oil
Daily January WTI Crude Oil

Prices could continue to firm over the near-term with Brent widening its spread over WTI. There is a lot of oil affected by this shutdown so supply is going to be reduced. Brent crude oil could rise to $67.00 to $70.00 over the short-run. This may be a big enough move to pull WTI crude to $60.00 a barrel.

The price surge could continue until INEOS gives a firm date for the repair of the crack. We could also overshoot the first targets because of excessive speculation by the hedge funds.

This article was originally posted on FX Empire

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