Oil prices Thursday extended the week’s gains and hitting 13-month highs, as a cold snap sweeping Texas and surrounding regions shut at least a fifth of U.S. refining output and a million barrels of crude production.
Brent crude climbed 93 cents, or 1.5 per cent, to $65.27 a barrel touching its highest since January 20, 2020. U.S. West Texas Intermediate (WTI) crude futures gained 76 cents, or 1.2 per cent, to $61.90 a barrel, registering its highest since Jan. 8, 2020.
Both benchmarks rose about $1 on Wednesday and have gained more than 6 per cent since their close last Thursday. The unusual freeze hitting much of the United States could hamper crude output for days or even weeks, analysts said.
The Texas energy sector remained without power for a fifth day on Wednesday, after an arctic blast stretched deep into southern states not typically hit by extreme cold.
Roughly 1 million barrels per day (bpd) of crude production have been shut, according to Wood Mackenzie analysts, and it could be weeks before production is fully restored.
“A flurry of fresh buying in oil futures was triggered as an unexpected impact on oil production and refiners in Texas from a cold storm raised supply fears of crude and fuel,” said Chiyoki Chen, chief analyst at Sunward Trading.
“A larger-than-anticipated draw in the U.S. crude oil inventories also added to supply concerns,” Chen said.
U.S. crude oil stocks fell by 5.8 million barrels in the week to February 12 to about 468 million barrels, compared with analysts’ expectations for a draw of 2.4 million barrels, American Petroleum Institute API, data showed.
Oil prices have rallied over recent weeks on hopes for U.S. stimulus and as global supplies tighten, due largely to production cuts from the Organisation of Petroleum Exporting Countries (OPEC) and allied producers in the group OPEC+.
But OPEC+ sources told Reuters the group’s producers are likely to ease curbs on supply after April given the recovery in prices.