Oil prices up on deep freeze at US refineries and Opec+ supply cuts

London — Oil prices advanced further on Wednesday, underpinned by major supply disruption in the south of the US this week caused by a winter storm in Texas.

Benchmark Brent crude gained 38c, or 0.6%, to $63.73 a barrel at 9.39am GMT. US West Texas Intermediate (WTI) crude rose 21c, or 0.4%, to $60.26 a barrel.

“WTI clocked in at $60 a barrel this week, joining its transatlantic peer [Brent] above the psychological level for the first time since January 2020. At this price point, any oil production is profitable,” said Stephen Brennock of broker PVM.

Oil has been supported in recent weeks by oil cartel Opec and its allied producers, including Russia (Opec+) supply curbs and hopes a demand rebound due to Covid-19 vaccinations, but severe cold weather in Texas, the country’s largest oil producing state, has boosted the prices in recent days.

The US deep freeze is expected to disrupt production for several days if not weeks, industry experts, as wellheads have frozen and refineries have been shut.

ANZ and Citigroup analysts estimated at least 2-million barrels per day (bpd) of US shale oil production had been curtailed. Citi estimated a cumulative production loss of about 16-million barrels until early March.

The stronger price environment has put more attention on Opec+, which meets to set policy on March 4.

“The impact on crude oil prices will largely depend on how long the power crisis lasts, but eventually prices will likely return to the fundamentals with a focus on the global energy demand and Opec+,” said Margaret Yang, a strategist at Singapore-based DailyFX.

Opec+ oil producers are likely to ease curbs on supply after April given a recovery in prices, Opec+ sources said.

“We believe that Opec+ will likely take a more conservative approach, and ease output more modestly,” said ING analyst Warren Patterson.

US oil inventory data from the American Petroleum Institute (API) and the US Energy Information Administration (EIA) will be released on Wednesday and Thursday respectively, a one-day delay for each after this week’s US holiday.

Analysts polled by Reuters estimated, on average, that crude stocks fell 2.2-million barrels in the week to February 12. 

Reuters