By Peter Nurse   

Investing.com — Oil prices edged higher Monday, rebounding after the previous week’s sharp selloff, as traders balanced supply woes with concerns about the global economic outlook.

By 09:30 ET (14:30 GMT), futures traded 1.6% higher at $72.14 a barrel, while the contract rose 1% to $76.82 a barrel.

Both contracts fell last week to their lowest levels since December 2021 on concerns that a possible global recession will hit oil demand.

Helping the tone Monday was the news that the Keystone pipeline between the U.S. and Canada remained closed, threatening to tighten supply to the largest consumer of crude in the world.

Canada’s TC Energy has yet to determine the cause of the leak to the pipeline, and consequently has no timeline as to when it would resume distributing 622,000 barrels a day of heavy Canadian crude to refineries in the U.S. Midwest and the Gulf Coast.

Additionally, Russian President Vladimir Putin warned that his country may cut oil output in response to western moves to cap the price of the country’s exports. 

Data from Bloomberg indicated that almost 90% of all the crude shipped from Russian ports last week was heading for Asia, effectively meaning that Moscow has all but ceased to be a supplier of crude oil to Europe after the EU ban on Russian crude imports by sea came into force on Dec. 5.

Europe had taken roughly half the country’s supplies at the start of the year before Moscow’s invasion of Ukraine. 

Still, it’s debatable how long this positive tone will last after Chinese authorities announced a steep rise in admissions to the country’s clinics, suggesting the COVID-19 virus has spread rapidly since restrictions on mobility were eased at the start of the month.

This is casting increasing doubt on the country’s growth outlook for the next six months, and thus demand from the largest importer in the world.

This comes at the same time as the majority of the world’s senior central banks are looking to hike interest rates to try and control rampant inflation, in all likelihood plunging the U.S., the European Union and the U.K. into recession next year.

Citigroup analysts cut their average forecast for crude next year by 10% to $80 a barrel.

This week will see a lot of information on the state of the oil market, with the Energy Information Administration releasing its monthly drilling productivity report later in this session, followed by OPEC’s on Tuesday and on Wednesday.