Oil Drops Below $71 as Traders Weigh Growth Outlook, Keystone

(Bloomberg)

Oil erased an earlier increase as markets struck a cautious note ahead of a week of interest rate decisions and a key North American crude pipeline remained shut.

West Texas Intermediate edged below $71, extending last week’s 11% plunge. TC Energy Corp. is continuing recovery efforts at its shuttered Keystone pipeline —which links fields in Canada to refiners on the US Gulf Coast — and a date for a restart hasn’t yet been set, according to a statement on Sunday.

Crude Stutters to Start the Week | US oil futures are extending last week's selloff

Crude remains on track for its first back-to-back quarterly decline since mid-2019 as the demand outlook sours and thin liquidity exacerbates price swings into the year-end. While December was expected to be a rocky month as sanctions on Russian oil exports came into effect, it is the weakening demand outlook, led by risks to global growth, that has weighed on prices.

“This week’s interest rate decision from the Fed, and other central banks including the ECB, will shed some light on how monetary policymakers see the current state of the world economy,” said Tamas Varga, an analyst at PVM Oil Associates.

ROO.AI Oil and Gas Field Service Software

Following the imposition of the price limit on Russian crude and related curbs, a backlog of tankers waiting to haul oil through Turkey’s vital shipping straits built up amid a dispute over insurance cover. That now appears to be clearing, with a port agent tally on Sunday showing 19 tankers waiting to pass through the Bosphorus and Dardanelles straits, down from a total of 27 on Saturday.

Prices:

WTI for January delivery fell 0.9% to $70.35 a barrel at 9:58 a.m. in London.
Brent for February settlement lost 0.9% to $75.41 a barrel.

Treasury Secretary Janet Yellen, one the price cap’s architects — gave a qualified thumbs-up on the initiative, telling CBS’s “60 Minutes” that the outcome was “so far, so good”. In the Middest East, meanwhile, Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman said the impact remained uncertain.

China has been moving away from its Covid Zero policy following a wave of protests, offering prospects for a revival in demand in the world’s largest crude importer. However, a surge in cases is now spurring concern on consumption over winter, with industry consultant FGE saying in a note that the sudden lifting of restrictions could pose downside risks for oil demand.