Brent prices edge higher in thin holiday trade

Front-month ICE Brent has gained $2.17/bbl from Friday to $84.08/bbl at 09:00 GMT. ICE Brent futures market was closed for trading yesterday on account of Boxing Day. Brent futures trading volume is expected to be muted this week due to the holiday season.

PHOTO: Getty Images

Upward pressure:

Brent prices have risen amid concerns about logistics and shale oil production being disrupted by winter storms blanketing the US and Canada. These concerns come when the energy demand is expected to rise in both countries.

China’s oil demand is expected to increase as the country prepares for a full reopening following nearly three years of COVID-related restrictions. BBC has reported that China will open its borders and lift mandatory quarantine restrictions for foreign tourists starting 8 January.

UBS analyst Giovanni Staunovo has told CNBC that Brent is likely to top $100/bbl next year. This is because China's easing of COVID restrictions will spur demand in the world's biggest crude importer and Russia will likely cut production following European sanctions.

"At the end of the day, I still believe that the European embargo will translate into lower Russian production, potentially also with the February 5 deadline on refined products," says Staunovo, adding, “Essentially, I guess it will be more difficult for Russia to find a market for all these barrels and that means lower Russian production.”

It is expected that Russian President Vladimir Putin will sign a decree halting supplies to G7 price cap participants this week. The Kremlin is expected to cut oil production by 500,000-700,000 b/d in early 2023.

Downward pressure:

US regulators have approved TC Energy's plan to restart the Keystone pipeline closed segment, from Steele City near the Nebraska-Kansas border to Cushing, Oklahoma, according to Reuters. TC Energy expects service to be restored after several days of testing. The 622,000-b/d pipeline was shut down on 7 December after spilling 14,000 bbls of oil in rural Kansas.

Brent prices are being shackled by the prospect of restrained oil demand due to a looming global recession and an expected slowdown in economic growth across major economies.

By Konica Bhatt

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