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Tuesday saw an increase in oil prices for a second day as a major pipeline supplying the United States, the world’s largest consumer of crude, remained closed and on hopes that demand will increase as COVID limits are eased in China, the world’s second-largest consumer of petroleum.
Supply has been restricted as a result of the suspension of TC Energy Corp.’s Keystone Pipeline, which transports around 620,000 barrels of Canadian oil per day from Alberta to the United States.
This has increased the likelihood that stockpiles at the Cushing, Oklahoma, storage hub will decrease. The delivery point for the WTI crude futures contract is likewise Cushing.
By 0202 GMT, Brent crude futures had increased by 64 cents, or 0.8%, to $78.63 per barrel, while US West Texas Intermediate (WTI) crude futures had increased by 64 cents, or 0.9%, to $73.81.
Since a 14,000-barrel leak in Kansas was detected on Dec. 7, Keystone has been shut down. The line, which transports petroleum to refineries in the Midwest and Gulf Coast, has not yet been restarted. A timetable has not been provided by TC Energy.
It is anticipated that the pipeline closure will result in a decrease in U.S crude inventories. In the week leading up to Dec. 9, stocks decreased by 3.9 million barrels, according to an average estimate from seven analysts surveyed by Reuters.
The poll was conducted ahead of reports due on Tuesday from the American Petroleum Institute and on Wednesday from the Energy Information Administration, the U.S. Department of Energy’s statistical division.
A successful economic reopening in China from its COVID-19 limitations, along with a dovish turn by the US Federal Reserve on interest rate rises, could enhance fuel demand and push Brent oil prices beyond $90 per barrel, according to Bank of America analysts.
Beijing made the largest revisions to its stringent COVID-19 rules last week, easing testing requirements and travel restrictions. Additionally, instead of recovering in institutions under central management, those who are sick but have only minor or no symptoms are now permitted to isolate at home.
The zero-COVID policy seemed set in stone after Chinese President Xi Jinping was handed an unprecedented third term in office. However, these strict regulations had made millions of Chinese citizens cautious, and they started a massive uprising. Even though Xi Jinping is the most powerful despot in the world, he has been forced to change course to appease ordinary Chinese people who are fed up with his failed “zero-Covid” plan.
Since Beijing’s about-face on COVID-19, there have been good developments on the energy markets, with both gas and oil prices rising.
Analysts predict that oil might reach $100 in 2023 as a result of China’s reopening and Russia’s difficulty in finding customers for its exports.
