Oil prices surge for fourth day in a row after Turkish pipeline explodes

Brent crude rose to over £64.69 ($88) a barrel on Wednesday following an outage to the Kirkuk-Ceyhan pipeline which runs from Iraq to Turkey. An explosion on Tuesday in the south of Turkey near the Syrian border resulted in a fire which firefighters have now managed to put out. The original cause of the blast is currently unknown with Turkey investigating whether sabotage was involved. Oil flows have now returned to normal, according to officials, with Turkey’s national energy company Botas using alternative lines while the explosion site is repaired.

The pipeline supplies oil from OPEC’s second biggest oil producer, Iraq, to Turkey where it can then be shipped to Europe.

With the pipeline usually carrying as much as 450,000 barrels a day, any outage is a major source of disruption at a time when a number of pressures are pushing oil prices up.

Earlier this week, oil prices rose following a suspected drone attack in Abu Dhabi which killed three people and resulted in a number of fuel tank explosions.

Tensions are also increasing around oil supplies from Russia due to troop movements on the border with Ukraine.

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Fears have grown of a potential invasion as Russian forces build up with the US warning an invasion could come at any point.

Natural gas supplies could also be impacted with Germany warning it may halt the Nord Stream 2 gas pipeline is Russia attacks the Ukraine.

The pipeline connecting Russia and Germany has been awaiting approval by German regulators at a time Europe has struggled with soaring gas prices.

Recent geo-political events come on top of a growing crunch in supply for oil with output failing to keep up with surging demand as Covid restrictions are removed.

During the pandemic, OPEC cut back its production due to lower demand and has since pledged to unwind the cuts with a target of increasing production by 400,000 barrels a day each month.

The US in particular has been pushing for greater increases in output due to the soaring prices, with President Biden even releasing oil from the US’s strategic reserves in a bid to increase supply and bring down prices.

However according to analysts, OPEC has been struggling to meet even its 400,000 target.

Nathan Piper, Head of Oil and Gas Research at Investec, told Express.co.uk the group had been missing its production quota for the last few months with Saudi Arabia refusing to make up for the shortfall of other members.

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Although still all producing oil a number of OPEC members have been held back by underinvestment and a backlog of maintenance work since the pandemic.

Mr Piper warned that oil demand was expected to continue to grow over the next 10 years and there were potentially major problems if OPEC wasn’t able to get back to full capacity.

The concerns mirror analysis from Goldman Sachs who predicted oil could break the milestone of $100 (£73.42) a barrel this year.

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