By Barani Krishnan
Investing.com -- Crude prices hit near one-year lows and settled down for a fifth day in a row but not before a choppy session where they swung more than $4 a barrel on news that a Canada-to-U.S. pipeline had shut, and the notion that tankers were piling up in Turkey due to the price cap on Russian oil.
New York-traded West Texas Intermediate, or WTI, crude for January delivery settled down 55 cents, 0.8%, at $71.46 per barrel.
Since its last positive close of $81.15 on Dec. 1, WTI has lost almost $10 a barrel, hitting a session low of $71.14, or a bottom not seen since Dec. 22.
Just as important perhaps was how much the U.S. crude benchmark rose on Thursday versus its drop later, with the gain being $2.81 intraday versus a deficit of $1.44.
London-traded Brent crude for February settled down $1.02, or 1.3%, at $76.15. The global crude benchmark has lost $10.73 since its last positive close of $86.88 on Dec. 1. Brent dropped as much as $1.40 during Thursday’s low to reach $75.77, a bottom not seen since Dec. 23. It earlier rose $3.32 for an intraday high of $80.49.
Thursday’s volatility in oil came after Canada's TC Energy (NYSE:TRP) said it shut its giant 622,000 barrel-per-day Keystone crude oil pipeline, which is the primary line shipping heavy Canadian crude from Alberta to the U.S. Midwest and Gulf Coast, after a spill into a Kansas creek.
The shutdown in principle puts a hefty amount of crude back into the market at the same time that global economic slowdowns raise fuel demand fears.
"The concern about the Keystone situation is just not there anymore, and I think that will get back up and running in no time so it won't be a material loss of crude from that pipeline hiccup," John Kilduff, partner at energy hedge fund Again Capital, said in comments carried by Reuters. "We're back looking at the demand outlook."
Adam Button, analyst on the ForexLive forum, agreed. “The drag for the oil market is growing worry about a recession and the idea that central banks have overtightened,” Button said. “Circularly, the fall in oil prices also reverses inflation, helping central banks.”
Crude prices earlier jumped on reports of a tanker log jam in Turkey due to the imbroglio over the Russian oil price cap.
But a U.S. Treasury statement later said the price cap on Russian oil imposed by Western powers did not necessitate checks of every tanker passing through Turkish waters and that Ankara has made clear it is working quickly to resolve the issue.
“We’ve been in touch with Turkey about how the price cap only applies to Russian oil, and explained that the cap doesn’t necessitate additional checks on ships passing through Turkish waters," the statement said. "Our understanding is that virtually all of the delayed tankers are not carrying oil from Russia and are not affected by the cap."
A Treasury spokesperson was also quoted saying that Turkey shared U.S. interests in maintaining a well-supplied oil market.
That led crude prices back into the negative.
Since Dec. 5, Western governments and their allies have collectively placed a price cap of $60 per barrel on Russian crude in a bid to limit the money Moscow can earn from its oil to fund the war in Ukraine. The government in the Kremlin has said the cap is unacceptable and that it will not sell oil to any country that tries to implement it.
Oil prices initially jumped on news of the cap on Monday but have tumbled since as President Vladimir Putin’s administration has no serious signs of retaliating against the cap, leading traders to think crude prices would eventually trade not too far from the limit.