Volatility dominated the crude oil futures markets this week as traders were hit with both potentially bullish and potentially bearish news. Traders reacted according, first driving prices higher than lower. The price action suggests that this week’s close will determine the near-term direction of the market.
The week started with Brent crude oil futures spiking 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.
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.
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.
“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.
West Texas Intermediate crude oil also rose on the news, but the spread widened between Brent and WTI. Although investors thought the news would drive prices…