Crude Posts Biggest Weekly Loss Since April Amid Pipeline Restarts

Even the possibility of Russia reducing output didn't ease bearish sentiment: File Image/Pixabay

The daily losses for crude on Friday were small, but the commodity posted its biggest weekly loss since April as pipeline restarts eased supply worries and enabled traders to refocus on demand concerns.

Additionally, crude is heading towards its first back-to-back quarterly decline since mid-2019, in response to inflation fears and as central banks around the world tighten monetary policy in a bid to avoid full blown recession.

West Texas Intermediate fell 44 cents to close at $71.02 per barrel, while Brent dipped 5 cents to $76.10 per barrel after falling as much as 1.4 percent.

According to people familiar with the matter, TC Energy Corp. on Saturday will restart a portion of the Keystone Pipeline, which closed in the previous session following a 14,000-barrel crude spill; also, Shell restored normal operations to a 20-inch segment of the Zydeco crude system (it had been running at reduced rates since November).

Rebecca Babin, a senior energy trader at CIBC Private Wealth Management, said, "Crude can't find a bid as Keystone looks to come back online in short order; for now, every headline is being seen through a bearish lens and buyers are not motivated get involved until they see demand signals improving."

Indeed, oil rallied earlier in the session by about 1 percent when Russian president Vladimir Putin said he might cut oil production in response to the price cap imposed against the former Soviet Union by the European Union and Group of Seven nations for invading Ukraine.

He remarked,  "I'm not saying now that this is a decision, but if necessary we'll think about possible production cuts; I have already said that we simply won't sell oil to those countries" that participate in a price cap.

However, the rally in response to Putin's words was short lived as a slightly higher-than-expected rise in U.S. producer prices in November and news of the partial Keystone restart undid the gains.

In fact, the disclosure that the U.S. producer prices index (PPI) rose slightly more than expected amid a jump in services costs caused analysts to worry that the increase will inspire the Federal Reserve to increase rate hikes – and make a recession all the more possible.