Oil rises on US supply concerns, expectations for returning China demand

Tuesday had seen 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 when Covid limits are loosened in China, the second-largest consumer of crude internationally.
By 0202 GMT, Brent crude futures were up 64 cents, or 0.8 percent, to $78.63 per barrel, while US West Texas Intermediate (WTI) crude futures were up 64 cents, or 0.9 percent, to $73.81.
The Keystone Pipeline closure by TC Energy Corp has reduced supply and increased the likelihood that stockpiles at the Cushing, Oklahoma, storage hub will decrease. The Keystone Pipeline transported around 620,000 barrels of Canadian oil per day from Alberta to the United States. The WTI crude futures contract’s delivery location is likewise Cushing.

Since a 14,000-barrel leak in the US state of Kansas was discovered on December 7, Keystone has been closed. 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 US crude inventories. According to seven analysts surveyed by Reuters, stocks decreased by 3.9 million barrels in the week ending December 9 on average.
The survey was done ahead of reports due on Tuesday from the American Petroleum Institute and on Wednesday from the Energy Information Administration, the US 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 above $90 per barrel, according to Bank of America analysts.