Oil Prices Soar Past $22 After North Sea Rig Blast

Oil prices surged to their highest levels since early 1986 on Wednesday after an explosion on a North Sea platform shut off a quarter of Britain’s oil production.

None of the 227 workers on the platform was hurt in the explosion, which followed a gas leak.

On the New York Mercantile Exchange, West Texas Intermediate, the key U.S. crude, for May delivery jumped $1.10 to close at $22.61 a barrel in heavy trading, the highest level since Jan. 17, 1986. Earlier in the day, the benchmark oil soared to $22.90 a barrel.

The explosion on a small gas platform Tuesday forced the shutdown of a major oil pipeline carrying 472,000 barrels a day of Brent crude mostly to European cities. Officials of Shell U. K. Exploration Production did not say when normal operations would resume. The platform is a main gathering point for Brent crude coming from major oil fields in the North Sea.

Pumping Station Leak

Prices received a further boost when BP America Inc., a subsidiary of British Petroleum Ltd., said Wednesday that flow on the Trans-Alaska pipeline would be cut by 25% during the day because of a leak at a pumping station. The operator of the pipeline said repairs to the pumping station were to have been finished late Wednesday afternoon.

The American Petroleum Institute released its monthly report showing that domestic production in March totaled 7.65 million barrels a day, down 8.2%, or 690,000 barrels a day, from the year-ago level. U.S. production had not been that low since 1964, when it averaged 7.61 million barrels a day, according to Ron Planting, API senior analyst in Washington.

The API, which represents major oil producers and refiners, attributed the drop to the March 24 Alaskan oil spill and to declining production in other major U.S. oil fields. The spill last month temporarily shut down critical oil shipping lanes into the lower United States.

Prices were also pushed by an API weekly report issued after the close of trading Tuesday, saying that crude oil stocks fell 5.7 million barrels for the week ended April 14.

In Europe, crude oil shot 75 cents higher to $20.90 a barrel, extending a rally that had already boosted gasoline prices around the world.

The May gasoline contract climbed 0.76 cents to close at 74.62 cents a gallon after touching 76.50 cents a gallon in morning NYMEX trading.

Energy prices have been pushed up by the Alaskan oil spill, a tight domestic gasoline market, supply cuts by the Organization of Petroleum Exporting Countries and earlier North Sea accidents.

C. Hossein Tahmassebi, chief economist for Ashland Oil Inc., said many in and out of the industry are questioning the reason for the North Sea accidents.

“Is this happening because of low oil prices and companies cutting back on maintenance to keep up profitability?” he mused. “If so, these types of things will continue happening.”