Brent futures set to shed more than 8% in weekly losses in the first week of 2023
Front-month ICE Brent has been almost flat on the day, recording a marginal increase of $0.18/bbl, to $78.73/bbl at 09.00 GMT.
PHOTO: Brent futures are headed towards 8% weekly loss in the first week of 2023. Getty Images
Upward pressure:
There is a tentatively positive mood in oil markets as China emerges from its zero-covid policy after three years, with a sharp surge in travel forecast over the Lunar New Year, despite global restrictions on Chinese travellers.
Reuters has quoted CMC Markets analyst Tina Teng as saying, “China’s reopening optimism, especially further stimulus measures to boost the property sector, is the main bullish factor for the oil prices, which has improved the demand outlook in the near year.
US pipeline operator Colonial Pipeline has halted oil product flows through its critical 850,000 b/d Line 3 that supplies fuel to the US Northeast due to a minor leak, Bloomberg cited the company’s spokeswoman Meredith Stone saying. Stone has informed Bloomberg that flows are expected to resume tomorrow.
Downward pressure:
Commercial US crude oil stocks increased by 1.69 million bbls to 420.64 million bbls in the week ending 30 December, according to official US Energy Information Administration (EIA) data. US Gulf Coast refinery utilisation dropped by a massive 18 percentage points to 77.7% as a blizzard caused some refineries to shut down during that week.
Meanwhile, several nations have placed restrictions on incoming Chinese travellers to avoid a surge in the spread of the Covid-19 virus following China's reopening of its international borders.
Although this will not directly impact Brent values immediately, if China relents to global pressure and reinstates Covid-19 restrictions, or if travel is reduced because of the virus, oil market demand may be negatively affected.
Another factor that is likely to weigh on market sentiments is the growing likelihood of a recession this year, especially in the US and Europe.
By Konica Bhatt
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