Wednesday, February 8, 2023
HomeMarketOil extends bounce as supply worries rise

Oil extends bounce as supply worries rise

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Oil futures rose Tuesday, finding support as the Keystone pipeline remained closed and investors gauged a potential boost to demand from China’s loosening of COVID-19 curbs.

Price action
  • West Texas Intermediate crude for January delivery
    rose 58 cents, or 0.8%, to $73.75 a barrel on the New York Mercantile Exchange.

  • February Brent crude
    the global benchmark, was up 83 cents, or 1.1%, to $78.82 a barrel on ICE Futures Europe.

  • Back on Nymex, January gasoline
    rose 1.4% to $2.11 a gallon, while January heating oil
    was up 1.8% at $3.022 a gallon.

  • January natural-gas futures
    were up 3.7% at $6.83 per million British thermal units.

Market drivers

Oil was extending a bounce seen after both Brent and WTI sank more than 11% last week to trade at levels last seen nearly a year ago.

The Keystone pipeline remains closed following a leak last week that spilled 14,000 barrels of crude in Kansas. The pipeline’s operator, Canada-based TC Energy Corp.
hasn’t provided a timetable for a resumption of flows. The pipeline carries around 600,000 barrels a day of crude from Canada to Cushing, Oklahoma, where it can connect to another pipeline to the Gulf Coast.

Meanwhile, China’s relaxation of its strict COVID-zero policy was seen as a positive, while Russia has warned that the $60 a barrel price cap on Russian crude, which trades at a significant discount to Brent, could prompt it to cut off exports.

Some analysts were skeptical of the bounce, noting that China’s rebound from the COVID curbs could be undercut in the short term by a jump in infections, while questioning Russia’s willingness to cut off flows

“I think that the oil rebound due to these three factors could be short-lived and may offer interesting top selling opportunities for medium-term bears looking for a further dip in oil prices to below $70 [a barrel],” said Ipek Ozkardeskaya, analyst at Swissquote.

Russia “is not harmed by $60 per barrel currently, U.S. supplies will be restored and the Chinese reopening may not be smooth due to potential disruptions in economic activity, because people are sick,” the analyst wrote.

Traders were also awaiting a monthly report from the Organization of the Petroleum Exporting Countries.


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