Oil resumes decline as weak economy outweighs supply risks

SINGAPORE/LONDON, Dec 12 (Reuters) – Oil prices fell on Monday, deepening a multiweek slide, as a weakening global economy offset supply problems stemming from the shutdown of a key pipeline delivering supplies to the United States and Russian threats to cut production.

Brent crude futures were down 38 cents, or 0.4%, at $75.72 a barrel by 0900 GMT. U.S. West Texas Intermediate crude was at $70.76 a barrel, down 26 cents, or 0.3%.

Last week, Brent and WTI fell to their lowest level since December 2021 amid concerns that a possible global recession would affect oil demand.

China, the world’s largest crude oil importer, continued to relax its strict zero-Covid policy, even as the streets of the capital, Beijing remained silent and many firms remained shut up during the weekend.

On Monday, queues formed outside fever clinics in the cities of Beijing and Wuhan, where COVID first emerged three years ago.

“Oil markets are likely to remain volatile in the near term amid uncertainty about the impact on Russian output from the EU ban, headlines about China’s policy on COVID and central bank moves in the US and Europe,” UBS analysts said in a note.

UBS said it believes Brent should recover to above $100 a barrel in the coming months amid supply constraints and rising demand, while OPEC+ will keep supplies tight.

On Sunday, Canada’s TC Energy (TRP.TO) said it has not yet determined the cause of the Keystone oil pipeline leak last week in the United States. He did not give a timetable for when the pipeline would resume operations.

The 622,000 bpd Keystone line is a critical artery delivery of heavy Canadian crude oil to US refineries.

Russian President Vladimir Putin said on Friday that Russia may cut production and will refuse to sell oil to any country that imposes a “stupid” price cap on Russian exports.

Saudi Arabia’s energy minister also said on Sunday that the price cap measures had no clear results more.

“The emerging EU embargo on Russian crude oil … could add modest upside risks to energy prices over the next few months. But supply uncertainty should ease by spring 2023 once the oil embargo (on February 5) is met,” Deutsche Bank said in a note.

Reporting by Florence Tan and Emily Chow in Singapore; Editing by Christian Schmollinger, Bradley Perrett and Simon Cameron-Moore

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