Dec. 12 (UPI) -- The perfect storm of a healthy appetite from China, a decline in global inventories and a major North Sea pipeline outage sent oil prices higher on Tuesday.
After a relatively quiet start to the day, Brent crude oil prices shot up 2 percent during Monday's session after pipeline operator Ineos shut down the Forties crude network in the North Sea after discovering a "hairline crack" on a pipe near Aberdeen, Scotland, last week.
The system carries about 40 percent of the oil produced in the British waters of the North Sea, or about 450,000 barrels of oil per day. London oil broker PVM said the outage, which Ineos said could take weeks to resolve, "is one of the most significant unplanned crude oil shortages we have seen this year."
Crude oil prices overnight were trending sharply higher, but were pulling back toward even in the minutes before the start of trading in New York. The price for Brent crude oil, the global benchmark and a component in the Inoes system, was up 0.5 percent as of 9:15 a.m. EST. West Texas Intermediate, the U.S. benchmark for the price of oil, was up 0.53 percent to $58.30 per barrel.
A spokesman for the International Energy Agency, which can call on its member states to release oil from their emergency stockpiles, told UPI the situation in the North Sea was under a close watch.
"But at the moment we see no need [to act] as the market is amply supplied from other sources and stocks are well above the five-year average," the spokesman said.
Crude oil prices had moderated in recent sessions as traders focused their attention on market fundamentals after the Organization of Petroleum Exporting Countries settled on a production agreement through 2018. The agreement, implemented in January, is designed to drain the surplus from the five-year average of global crude oil inventories and is credited with setting a floor under crude oil prices of $50 per barrel.
Speaking in Beijing, OPEC Secretary General Sanusi Barkindo said the balancing process is well under way.
"Commercial oil stocks in the Organization of Economic Cooperation and Development fell further in November and the difference to the latest five-year average has been reduced by around 200 million barrels since the beginning of this year," he said in his remarks.
That puts the balancing effort at more than halfway to its goal, based on OPEC commentary from November.
Elsewhere, Barkindo said the appetite from China, the world's second largest economy, behind the United States, was continuing to grow. By his estimate, Chinese demand for OPEC crude oil will increase by almost 4 million barrels per day, going from 4.4 million barrels per day last year to 8 million barrels per day by 2040.
That, he said, represents "around 20 percent of the world's total crude oil trade between major regions by 2040."