Oil tapped a fresh one-year low, finishing a volatile trading session where supply concerns following a pipeline outage sent prices soaring.
West Texas Intermediate fell to $71.60 in New York, the lowest since December last year, erasing earlier gains of as much as 4.8% where the price briefly surpassed $75.
The Keystone oil pipeline, which can haul more than 600,000 barrels of crude daily from Canada into the U.S., was halted due to a leak, people familiar with the matter said. No timeline was given for its restart.
In a market grappling with scant participation heading into year-end, news of the outage could lead to big moves in both directions, traders said.
“Oil markets are exhausting,” said Ed Moya, senior market analyst at Oanda.
“The initial oil spike following the Keystone Pipeline leak news did not last as some energy traders expect this disruption to be temporary,” he added.
Timespreads, which reflect nearby supply and demand, have swung between signaling tight markets and oversupply.
Keystone’s outage added further volatility to the WTI prompt spread, which measures the gap between the front two futures contracts.
“Short-term technical traders are in control as the overall level of participation continues to fall ahead of year-end,” said Ole Hansen, head of commodities strategy at Saxo Bank.
“It has been a very difficult year across markets and an early closing of books seems to be unfolding.”
Oil has weakened this month, erasing all of this year’s once-substantial gains, as central banks tighten monetary policy and the macroeconomic outlook sours.
The pace of the selloff in recent weeks means that the global Brent benchmark is now oversold, one sign that the market rout could be nearing an end.
Though sanctions on Russian crude have had little impact so far on the market, there’s a growing backlog of oil tankers near the Turkish Straits after an insurance wrangle prevented some vessels from passing through the country’s waters.
The standoff escalated Thursday as Turkey said it would remove ships without insurance letters from its waters.
Meanwhile, Amos Hochstein, the U.S. State Department’s senior energy security adviser, said Wednesday that President Joe Biden’s administration is still weighing the impact of China’s reopening – and the price cap on Russian supplies – before moving to start replenishing the depleted Strategic Petroleum Reserve.
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