Oil slipped after rallying almost 9% over the previous three sessions as TC Energy Corp. restarted a section of the Keystone pipeline, allowing for some flows to resume on the major conduit.
West Texas Intermediate futures retreated below $77 a barrel, while global benchmark Brent crude declined. A section of the pipeline that extends from Hardisty, Alberta, to Wood River and Patoka, Illinois, was restarted and TC Energy is continuing repair and remediation on the affected segment.
The restart “may help to ease supply concerns as well and drive some near-term volatility,” said Yeap Jun Rong, a market strategist at IG Asia Pte. The long-term outlook still revolves around “global economic activities, which is seeing some face-off between hawkish Fed policies and China’s reopening.”
Oil is still on track to end 2022 marginally higher following a volatile period that’s been exacerbated by a persistent lack of liquidity. However, investors are juggling a mixed outlook for commodity demand, including the near-term impact of China’s end to Covid Zero, which has sparked a surge in infections.
The International Energy Agency said Wednesday that oil prices could rally next year as sanctions squeeze Russian supply, although OPEC and Goldman Sachs Group Inc. are cautious about demand in early 2023. The US Federal Reserve also raised interest rates again and warned they still have room to climb.
Prompt time spreads held in a bearish contango structure, although the gap has eased. The gap between the two nearest contracts for global benchmark Brent was 3 cents a barrel in contango, compared with 44 cents a week earlier.
© 2022 Bloomberg