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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Supply Uncertainty Pushes Oil Prices Higher

  • Oil prices started the week with a slight gain as supply uncertainty helped to halt last week’s downward momentum.
  • The shutdown of the keystone pipeline and uncertainty regarding how the G7 price cap will influence Russian exports are the main bullish factors for oil.
  • Last week. fear of significant demand destruction due to a global recession helped to push oil prices to the lowest level since December 2021.

Crude oil began trading this week with a gain, pushed higher by the shutdown of the Keystone pipeline and uncertainty around the consequences of the G7 price cap on Russian oil exports.

Brent crude was trading close to $76.50 per barrel at the time of writing, with West Texas Intermediate at close to $71.60 per barrel, both up by more than 1 percent from Friday’s close. Last week, the benchmarks fell to the lowest since December last year.

The biggest driver for the last few weekly declines has been fear of a global recession, which would affect demand adversely. This fear has also been noted as reason for the limited gains oil has made following otherwise bullish news such as Russia’s reiteration that it would not export oil to price cap enforcers and China’s post-Covid reopening.

Even the news that OPEC+ had once again missed its production quota, and by quite a significant margin, failed to elicit a strong response from oil traders.

A survey from Argus showed on Friday that oil production in OPEC+ had fallen to 38.29 million barrels daily in November. This was 1.81 million bpd below the group’s updated, lower, quota.

What’s perhaps more worrying, although not surprising, is that it was OPEC that accounted for the decline while non-OPEC members of the wider pact saw their output increase in November. Kazakhstan’s output rose by 330,000 bpd while Russia saw its production inch up by 190,000 bpd.

Meanwhile, TC Energy shut down the Keystone pipeline 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 some 600,000 bpd of Canadian crude to the United States.

"Oil prices are higher as the Keystone pipeline remains shut, China's COVID controls ease and on concerns that Russia could reduce output," Oanda senior market analyst Edward Moya told Reuters earlier today.

By Irina Slav for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on December 12 2022 said:
    The Western price cap on Russian oil exports will only create confusion and add to shortages in the global oil market. Moreover, prices will soon resume their surge while the cap will be consigned to the waste bin.

    Therefore and due to global underinvestment, I project that shortages and market tightness along with inflation, recession and a continued global energy crisis will remain with us for many years to come.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • George Doolittle on December 12 2022 said:
    This only makes the current *MASSIVE* US recession now well underway even worse...and will cause the US Fed to tighten another 50 basis points this week further inverting the US yield curve.

    Grid stability is normative if during a big cool down a sudden dry spell follows behind this week's massive frontal boundary passing through as well...meaning a *GLUT* of electrons as well. Anyhow great week for $ba Boeing this past week would be an understatement.

    Long $ibm International Business Machines
    Strong buy

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