An explosion at a crucial crude pipeline from Iraq to the Turkish port of Ceyhan has disrupted oil supplies, with crude prices rising for the fourth day in a row to seven-year highs, amid a tighter global supply outlook and regional geopolitical concerns in the Middle East.
Turkey's state-owned pipeline operator Botas said on Tuesday it had cut oil flows at the Kirkuk-Ceyhan oil pipeline following an explosion near the south-eastern province of Kahramanmaras.
Botas said that a fire erupted after the explosion and firefighters and emergency personnel were deployed that later extinguished the blaze.
However, the firefighters are still working on further cooling off the area, media reports claimed.
"The oil pipeline will be operational as soon as possible after necessary precautions are taken," it added.
The reasons behind the pipeline explosion are still unclear and the incident is being investigated, Botas said.
The oil pipeline is said to be a crucial one and transported more than 450,000 barrels per day last year, Upstream understands.
The pipeline carries crude oil from Iraq’s Kurdistan region for export from Turkey's port of Ceyhan.
Kurdish crude exports averaged 10 million barrels per month between October and December, Reuters reported, adding 5.2 million barrels have been loaded, so far, in January.
The cargoes mainly head to refineries in Mediterranean countries such as Croatia, Greece, Italy and Spain.
Oil prices rise
Crude oil prices edged higher on Wednesday morning, with Brent spot prices trading at seven-year highs, near $88.6 a barrel, amid a tighter global supply outlook and rising geopolitical concerns in the United Arab Emirates (UAE).
The initial jump in oil prices occurred on Monday after Iran-backed Houthi rebels in Yemen launched an attack on Abu Dhabi facilities, killing at least three Adnoc workers.
In a statement, the UAE’s Foreign Ministry has indicated that retaliation was possible.
“(The attack) will not go unpunished. The UAE reserves the right to respond to these terrorist attacks and criminal escalation," the ministry said.
The UAE on Tuesday evening called for a meeting of the United Nations Security Council to condemn an attack on Abu Dhabi by the Houthis, who have threatened further attacks.
In the meanwhile, Russian troops are lined up on the Ukraine border, leading to further geopolitical concerns.
$100 oil price
Goldman Sachs said this week that Brent oil prices are expected to rise above $100 per barrel later this year.
It said that the oil market remains in a "surprisingly large deficit" as demand hit from the Omicron coronavirus variant is so far smaller than expected.
The hit to demand from Omicron will likely be offset— by gas-to-oil substitution, increased supply disruptions, Opec+ shortfalls, and disappointing production in Brazil and Norway, the analysts wrote in a note on Monday, Reuters reported.
The disruptions in oil markets come at a time when Opec and its allies, known as the Opec+ grouping, are finding increasingly difficulty to add 400,000 barrels per day of oil supplies each month, as mandated in their agreement.