Crude Oil Higher; Wintry Conditions Remain

© Reuters.

By Peter Nurse — Crude oil prices were mixed Wednesday, largely retaining recent gains after a severe winter storm disrupted U.S. production, particularly in Texas, while demand surged given the cold temperatures.

By 9:25 AM ET (1425 GMT), futures traded 0.1% lower at $60.05 a barrel, while the international benchmark contract rose 0.4% to $63.58, both contracts having earlier climbed to their highest levels since January last year.

U.S. Gasoline RBOB Futures were up 1.2% at $1.7940 a gallon.

An unprecedented cold snap in the U.S. has halted oil wells and refineries, particularly in Texas, the state with the largest crude production in the U.S., with and crude pipeline operators also facing restrictions.

Roughly 500,000 to 1.2 million barrels per day of the state’s crude production has been shut-in by the weather, according to analysts at Rystad Energy.

“The winter storm-warning across Texas remains in force until Thursday morning, and freezing or near-freezing conditions are expected to last until Friday. This suggests that disruptions to crude oil output may linger for at least a couple of days more,” analysts at ING said in a research note.

These oil price gains, on top of the already positive tone in the market on the back of expectations of sharp demand growth from additional U.S. stimulus and ramped-up global vaccinations programs, brings the next OPEC+ meeting into sharp focus.

The Organization of Petroleum Exporting Countries and allies, a grouping known as OPEC+, is set to meet on March 4 to discuss production levels from the start of April.

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“The group is currently cutting by around 8.13MMbbls/d,” ING said. “If they were to ease to 5.8MMbbls/d, which is the level of cuts they agreed to under the initial deal, that would bring a little over 2.2MMbbls/d of output back, and that is a level the market is likely to baulk at.”

Ahead of this, U.S. oil inventory data from the API industry association will be released at 4:30 PM ET (2130 GMT), delayed by a day after U.S. markets were closed on Monday.


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