Brent futures under pressure from growing recession concerns

Front-month ICE Brent has decreased by $0.35/bbl on the day from Friday, to $75.81/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Russian President Vladimir Putin has reiterated that Russia will stop oil sales to G7 price cap participants and consider production cuts “if necessary,” Reuters reports, and quotes him saying, "all of this could lead to a catastrophe in prices and the collapse of the global energy sector at some point. I think this is an ill-conceived and poorly thought-out proposal.”

According to pipeline operator Canada-based TC Energy, a vital pipeline between the US and Canada ruptured in an accident, spilling nearly 14,000 bbls of oil throughout Kansas. The pipeline has been shut down for repairs. According to Reuters, TC Energy contained the leak on Sunday, but a timeline for restarting it has not yet been announced.

The keystone Pipeline is one of the most crucial arteries in the US. A total of 622,000 b/d of Canadian heavy crude is shipped from Alberta, Canada to refineries in the Midwest and Gulf Coast of the US. The US market could face tight oil supplies if the disruption persists.

OPEC+ production declined by 310,000 b/d from October to 38.29 million b/d in November, according to an Argus Media survey estimate. This is about 1.81 million b/d below their combined production quota, which was already cut by 2 million b/d for November. OPEC's core members are also underproducing towards their combined target, as the survey notes that "output among the 10 OPEC members with targets fell by 770,000 b/d in November, reaching a six-month low."

Downward pressure:

Prices are being held back by fears of an imminent recession limiting demand. Market participants are treading cautiously as experts and policymakers have warned of a "mild to serious" recession in 2023, especially in the UK, Europe, and the US.

“The short-term crude demand outlook has deteriorated significantly as no one has a strong handle on how bad a recession will hit the US economy,” according to Edward Moya, a senior market analyst at OANDA.

By Konica Bhatt

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