Crude oil price ended its 4-day drop as an outage on a major US pipeline and optimism over the reopening of the Chinese economy has led to a jump in prices.
According to Oilprice.com, the American WTI rose by over 4% to trade at about $75 per barrel on Thursday, while the Brent crude rose by over 1% to trade at $77.97 per barrel.
Oil prices had fallen to the lowest level this year on Wednesday morning, indicating the bearish sentiment in the oil market despite the recent price cap by the G7 countries.
Major US oil pipeline shut
Meanwhile, Bloomberg in its report stated that the Keystone oil pipeline, which can move over 600,000 barrels a day of crude from Canada into the US, ceased operations after spillage into a creek. No timeline was given for its restart.
The pipeline shutdown in addition to the positive signals from China, where a relaxation of the Covid-19 restrictions has increased the prospects of improved demand, appeared to have contributed to surge in oil prices.
Bearish oil market sentiments
The oil market has been bearish this month despite the recent price cap, although some analysts have said that the downside to oil is limited as fundamentals are supportive and there are no major bearish catalysts looming.
The weakened oil prices, erased all of this year’s once-substantial gains, as central banks tighten monetary policy and the macroeconomic outlook sours. The pace of the selloff in recent weeks means that the global Brent benchmark is now oversold, one sign that the market rout could be nearing an end.
The world’s largest importer of crude oil, China, who had to deal with protests over its tough restrictions as part of measures to deal with the resurgent Covid-19 outbreak, appears to have relaxed its policy to hasten the opening up of the economy.
Russian sanctions have little impact
The sanctions on Russian crude have had little impact so far on the market, although there has been a growing backlog of oil tankers near the Turkish Straits after an insurance wrangle prevented some vessels from passing through the country’s waters.
The standoff escalated Thursday as Turkey said it would remove ships without insurance letters from its waters.
Earlier, oil traders had been anxiously waiting to see how the price cap on Russian oil will affect the market, as the measure was yet to impact prices.
After the Group of Seven agreed on a $60 per barrel price cap last Friday, the new measure came into effect earlier this week amidst repeated pledges from Russia not to sell any oil to countries that are participating in the price capping.