NEW YORK (Reuters) – Oil prices rose nearly $2 a barrel on Monday on supply volatility, with a major pipeline shutdown supplying the United States and Russia threatening to cut output even as China’s easing of COVID-19 restrictions boosted the fuel demand outlook. .
Brent crude futures rose $2.01, or 2.6%, to $78.11 a barrel by 1:09 pm EST (1809 GMT). US West Texas Intermediate crude rose $2.40, or 3.4%, at $73.42 a barrel.
Last week, Brent and West Texas Intermediate fell to their lowest levels since December 2021 as investors worried that a potential global recession could hurt oil demand.
The potential for a prolonged outage for TC Energy Corp (TRP.TO) The crude oil pipeline from Canada to the United States helped Keystone turn prices around.
“The repair of the Keystone pipeline appears to be taking longer than expected to increase the potential for more inventory withdrawals at Cushing,” said Jim Ritterbusch of Ritterbusch and Associates.
Traders worried about how long it would take to clean up and restart the Keystone oil pipeline after the spill of more than 14,000 barrels of oil last week, the largest crude oil spill in the US in nearly a decade.
TC Energy shut down the pipeline after discovering the leak late last Wednesday in Kansas. The company told officials in Washington County, Kansas, that they had not yet determined the cause and were drilling at about 622,000 barrels per day of the Keystone Line, a vital artery that ships heavy Canadian crude to US refineries.
The outage is expected to reduce supplies at Cushing, the storage hub in Oklahoma, and the delivery point for US crude oil futures.
Bank of America Global Research said Brent crude could rebound beyond $90 a barrel on the back of pivots in monetary policy by the US Federal Reserve and a “successful” economic reopening by China.
“Reopening China is definitely something the market is focused on,” said Phil Flynn, an analyst at Price Futures Group.
China, the world’s largest importer of crude oil, continued to ease its strict policy against the spread of the novel coronavirus, although streets in the capital Beijing remained quiet and many businesses remained closed over the weekend.
On Monday, lines formed outside fever clinics in the cities of Beijing and Wuhan, where COVID first emerged three years ago.
“Oil markets are likely to remain volatile in the near term amid uncertainty about the impact on Russian production from the EU ban, headlines on China’s coronavirus policy, and central bank moves in the US and Europe,” UBS analysts said in a note. .
Russian President Vladimir Putin said on Friday that Russia may cut production and will refuse to sell oil to any country that imposes a “stupid” ceiling on Russian export prices.
The Saudi energy minister said on Sunday that price cap measures had not produced clear results so far.
The number of tankers waiting to pass through the Bosphorus Strait in Istanbul decreased on Monday, which indicates a decrease in traffic congestion in recent times.
“The emerging EU embargo on Russian crude…may add moderately bullish energy price risks in the next few months. But uncertainty about supplies should ease by spring 2023, after the ban on oil products (on February 5th),” Deutsche the bank said in a note.
Additional reporting by Dmitry Zhdannikov, Florence Tan and Emily Chao in Singapore. Editing by Margarita Choi and David Gregorio
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