January 30, 2023

Oil prices stabilized after falling as a weak economy offset supply risks

Oil prices stabilized after falling as a weak economy offset supply risks

  • Oil has fallen for four out of the past five weeks
  • With the Keystone pipeline shut down, Russia threatens to cut production

LONDON (Reuters) – Oil prices stabilized on Monday after several weeks of declines, as global economic weakness offset supply problems caused by a major pipeline shutdown supplying the United States and Russia’s threats to cut production.

Brent crude futures fell 15 cents to $75.95 a barrel by 1310 GMT. US West Texas Intermediate crude recorded $71.39 a barrel, up 37 cents.

Last week, Brent and West Texas Intermediate fell to their lowest levels since December 2021 amid fears that a possible global recession will affect demand for oil.

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. .

UBS said it believes Brent crude should recover to above $100 a barrel in the coming months amid supply constraints and rising demand while OPEC+ keeps supply tight.

On Sunday, Canada’s TC Energy (TRP.TO) It said it had not yet determined the cause of the Keystone pipeline leak last week in the United States. It did not give a timetable for when the pipeline would resume operation.

The Keystone line, with a production of 622,000 barrels per day, is an important artery shipping heavy Canadian crude to US refineries.

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.

(Reporting by Florence Tan and Emily Chow in Singapore; Editing by Bradley Perrett, Simon Cameron-Moore and David Evans

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