Oil prices rallied in early Asian trade as the Keystone pipeline remains closed, China’s COVID controls are relaxed, and concerns that Russia may cut production.
Oil prices rose more than 1% on Monday as a major pipeline to the US remained closed and Russian President Vladimir Putin threatened to cut production in retaliation for the ceilings set on Western exports.
Brent crude futures were up 46 cents, or 0.6%, to $76.56. West Texas Intermediate (WTI) crude was up 57 cents, or 0.8%, at $71.59 a barrel.
Monday’s price increases for Brent and WTI came after last week slashed declines in both indicators to the lowest level since December 2021 amid concerns that a possible global recession will affect oil demand.
Canadian TC Energy said on Sunday it has yet to determine the cause of the Keystone oil pipeline spill that occurred in the US last week. No timeline was given for when the pipeline would be operational again.
With a capacity of 622,000 barrels per day, the Keystone line is a critical artery that carries heavy Canadian crude from Alberta to refineries in the US Midwest and Gulf Coast.
The streets in the capital Beijing have remained quiet as China, the world’s largest importer of crude oil, continues to relax its strict zero-COVID policy. Many businesses remained closed over the weekend, and residents say a return to normalcy is not so imminent.
Putin said on Friday that Russia, the world’s largest energy exporter, could cut production and would refuse to sell oil to any country that imposed a “stupid” price ceiling on Russia’s exports, agreed upon by the G7 countries.
While the European Union’s sanctions on Russian oil and the uncertainty regarding the related price ceiling keep the volatility in prices high, the sanctions have had a limited impact on global markets so far.
Saudi Arabia’s energy minister also said on Sunday that the impact of European sanctions and price cap measures has not yet had a clear result and its implementation is still uncertain.
In the US, Treasury Secretary Janet Yellen predicts a significant drop in US inflation in 2023 unless there is an unexpected shock.
