Oil is rising due to a pipeline accident
2022.12.13 14:30
Oil is rising due to a pipeline accident
Budrigannews.com – Before Tuesday’s relatively benign inflation data that suggested smaller U.S. rate hikes going forward, oil was already recovering from last week’s worst selloff in nine months thanks to the closure of a pipeline connecting Canada and the United States.
For the second day in a row, Brent oil, which comes from the United Kingdom, and WTI crude, which comes from the United States, experienced a rally of at least 3%. That resulted in a week-over-week gain of approximately 6% for the two benchmarks, reversing the decline of almost 12% experienced the previous week.
By 13:45 ET (18:45 GMT), crude was trading at $80.89, up $2.90, or 3.7%. It increased by 2.4% on Monday. Last week, the global crude benchmark dropped $9.47, or 11%, to $75.14, a low not seen since December 23, 2021.
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for January delivery was $75.80, an increase of $2.63, or 3.6%. WTI gained 3% on Monday. The benchmark U.S. crude ended the week down $9.28, or 11%, making it the worst week since March 25. WTI hit a session low of $70.11 last week, the lowest it had been since December 21, 2021.
The Keystone pipeline that transports heavy Canadian crude to the U.S. Gulf Coast of Mexico is still in the process of being shut down, which coincided with the oil rally.
The length of time it would take for Canada’s TC Energy (NYSE:) Corp. to clean up and reopen the pipeline where over 14,000 barrels of oil leaked last week, making it the largest crude oil spill in the United States in nearly a decade.
After the spill was discovered in Kansas late last Wednesday, TC Energy shut down the pipeline. The company informed authorities in Washington County, Kansas, that they were excavating around the 622,000 barrel-per-day Keystone line, a crucial artery for shipping heavy Canadian crude to U.S. refiners, and that they had not yet determined the cause. According to Reuters, the outage is expected to reduce supplies at the storage hub in Cushing, Oklahoma, which serves as the delivery point for benchmark U.S. crude oil futures.
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After U.S. consumer prices showed the smallest growth in almost a year in November, a victory for the Federal Reserve’s plans to slow down rate hikes after aggressively hiking them in recent months to curb price pressures, risk appetite in oil received an additional boost on Tuesday as the dollar plunged.
In contrast to its annual growth of 7.7% in October, economists had anticipated the CPI to expand by 7.3% in the year to November.
According to a statement released by the Labor Department, “This was the smallest 12-month increase since the period ending December 2021.”
The CPI hit a 40-year high in June when it developed at a yearly pace of 9.1%. It has returned a full 2% over the past five months since that peak, slowing every month.
In a post on the ForexLive forum, economist Adam Button referred to the 0.5% annual decline in October as “the previous report surprising to the downside.” Button stated, “This isn’t quite as surprising, but it’s in the same direction” in encouraging the Fed to slow down its rate hikes.
The Fed’s inflation target is just 2% per year. Since March, the central bank has increased interest rates by 375 basis points through six increases. Prior to that, the Fed slashed interest rates to nearly zero in 2020 following the global COVID-19 outbreak, bringing them down to just 25 basis points.
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The Federal Reserve is now considering a 50-basis point increase for its December 14 rate decision, following four consecutive 75-basis-point hikes of jumbo rates from June to November.
What the next rate hike will look like in February 2023 is more important than that: On Tuesday, early indications from the money markets suggested a 25-basis point increase. If this is true, it will match the March increase that kicked off the Fed’s 2022 rate hike series.
