The severe winter storm that swept through the United States last week likely shut in between 2 million and 4 million b/d of US crude oil production, IHS Markit said in an analysis. The freeze, which started in Texas and moved east across much of the US, has also impacted almost 6 million b/d of refining capacity, including 5.2 million b/d along the Gulf Coast and 730,000 b/d in the Midwest. Issues with power outages, frozen pipes, roads, and personnel have resulted in a large volume of US oil and natural gas production being shut in. This storm is turning into a global problem. According to Citi estimates, the total lost US production by early March could reach 16 million barrels. Others, however, say the lost production could be twice as high.
Prices in London climbed for a fourth straight week as efforts to clear an oil surplus are supporting oil prices until demand comes back to pre-pandemic levels. Brent futures surged the most since early January on Friday, while West Texas Intermediate crude flirted with $60/barrel for the first time in more than a year. Oil demand outlooks improved amid signs of progress on US COVID-19 vaccination distribution and Washington’s coronavirus stimulus package.
Brent closed on Friday at $59.44—close to the benchmark’s $60 psychological threshold. Last week at this time, the spot price for Brent was just $55.04. The near $5 gain is due to a combination of factors, including a large crude oil inventory decrease in the US, continuing OPEC+ production restraint, Aramco’s price hike to crude for Europe, US traders drunk on stimulus chatter, and whispers of an overall tightening oil market. But can this uptrend last amid lockdown extensions and oil demand that just isn’t there yet?
Oil: Prices remained in a narrow range for the third week, around $52 in New York and $55 in London. As has become routine, much of the news impacting oil prices has to do with the coronavirus and vaccine programs’ pace. For the immediate future, lockdowns in many regions will limit demand. The more contagious coronavirus variant identified in South Africa has reached the US, raising worries that more outbreaks may be ahead.