Coverage: Oil price hits a two-year high

Oil prices spiked to their highest level in two and a half years after a pipeline exploded in Libya.

Nathaniel Meyersohn of CNNMoney.com had the news:

Libya’s state-run National Oil Corporation said the explosion jeopardized output by up to 100,000 barrels a day. The cause of the blast was unclear, the agency said.

U.S. crude oil prices spiked up to 2.5% Tuesday to more than $60 a barrel, the highest level since June of 2015. Last month, oil prices jumped after the Keystone pipeline shut down following an oil spill.

Still, prices remain low compared with $100-a-barrel prices three years ago.

There’s been a glut of oil in recent years, forcing the Saudi-led OPEC cartel to cut production to lower supply.

Tom DiChristopher of CNBC.com reported that Libya has been exempt from production caps:

Libya is one of two OPEC members, along with Nigeria, that were exempt from a deal to cap production this year. Both countries have suffered oil supply outages related to internal conflicts.

The 14-member cartel, Russia and nine other exporting nations recently extended an agreement to keep 1.8 million barrels a day off the market to help shrink brimming stockpiles of crude around the world.

That deal has helped to balance a glutted market, so supply disruptions are more likely to push up crude prices.

Prices have been supported in recent weeks by another pipeline outage that carries U.K. North Sea Forties crude to market. The price impact has worn off in recent days as operator Ineos has signaled the pipeline will soon start moving oil again.

Alison Sider and Benoit Faucon of The Wall Street Journal reported that Brent prices are up due to a pipeline leak:

Earlier this month, Brent prices jumped after one of Europe’s most important pipeline systems sprang a leak and had to be shut down, cutting off the flow of some 450,000 barrels-a-day of North Sea oil.

Ineos, the British chemicals and refining company that owns the line, said Tuesday that it is making good progress toward restarting the line. A small number of customers are now sending volumes through the pipeline at low rates, and Ineos said in a statement that it expects to be operating at normal rates early next year.

OPEC and other major producers, including Russia, have been curbing production all year. OPEC agreed in November to extend production cuts throughout 2018 as it targets reducing global stocks to their five-year average.

Fuel prices also vaulted higher Tuesday. A blast of icy weather is set to boost demand for heating oil even as supplies are relatively tight heading into winter. Diesel futures rose 6.48 cents, or 3.29%, to $2.0342 a gallon. Gasoline futures rose 4.53 cents, or 2.57%, to $1.8076 a gallon.