Crude oil prices continued climbing higher in early trade today, driven by China’s relaxation of Covid-related restrictions.
The shut-down of the Keystone pipeline following an oil leak also contributed substantially to the latest price movements, that saw Brent crude approach $80 per barrel at the time of writing, and West Texas Intermediate nearing $75 per barrel.
TC Energy shut down the Keystone pipeline last weekend after a leak was detected in Nebraska and did not give a timeline for the restart of the oil transport channel, fueling concern about supply in the United States. Keystone carries more than 600,000 bpd of Canadian crude to the United States.
The latest update from TC Energy said the company had cleaned up a portion of the 12,000-barrel spill but still did not provide a timeline for the restart of the pipeline.
China’s reopening, on the other hand, is seen as particularly bullish for oil demand, after lockdowns earlier this year pushed prices down because they had the opposite effect on the biggest oil importer in the world.
“Crude prices are rising on hopes China’s demand situation will quickly improve and on concerns that supplies will be kept tight by both Russia and OPEC,” analyst Edward Moya from Oanda told The National.
“China’s reopening is coming, it won’t happen overnight, but it will provide a major boost to demand in the outlook next quarter,” he added.
Analysts from Chinese Haitong Futures, on the other hand, noted, speaking to Reuters, that while the reopening was underway, Covid infections in large Chinese cities were still on the rise, putting the reins on any premature optimism and, as a consequence, any oil price rises.
Meanwhile, the shutdown of the Keystone is expected to lead to yet another draw in U.S. crude oil inventories, which would also have an effect on prices, albeit likely temporary, for the duration of repairs.
By Irina Slav for Oilprice.com
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Meanwhile, the Western price cap on Russian oil exports seems to be heading to the waste bin having created confusion and uncertainty in the market particularly among global oil traders.
The fact that crude oil is never sold in the market at fixed prices has caused a lot of confusion for oil traders who neither want to sell their oil contracts at a loss nor do they want to fall foul of sanctions.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert