Oil prices have rebounded after annual lows. The rise in price is due to the prospect of an extended outage in a key pipeline between Canada and the U.S.
However, markets remained cautious ahead of inflation data and this week’s upcoming Federal Reserve meeting.
Another factor was China easing Covid curbs. The major crude importer is still struggling with record-high infection increases.
Uncertainty over a global recession, weak Chinese demand, and a smaller-than-expected price cap on Russian oil battered crude prices over the past two weeks. Oil was largely supported by the prospect of tighter supplies because of an outage in the Keystone pipeline.
Canada’s TC Energy Corp, which operates the Keystone pipeline, said it was uncertain over how long it would take to resume supplies following a major spill last week.
The oil spill happened in Kansas and saw over 14,000 barrels of oil being leaked. It was the largest U.S. oil spill in nearly a decade.
Analysts said that this could spur further draws from U.S. inventories, which is likely to tighten supply in the near term.
The focus will now turn to inflation data, which is due today and expected to factor into the monetary policy for the U.S. for 2023. The consumer price index is expected to have eased further last month in November compared to the previous month in October.
But markets are still wary of any surprises, especially after the producer price index eased less than expected.
There is still potential for higher interest rates.
A sharp rise in U.S. interest rates drove up concerns over a potential recession, which weighed heavily on crude markets this year. Softening economic indicators from across the globe strengthened this notion in recent months.