Oil prices settled near 13-month highs on Tuesday, supported by a deep freeze in the U.S. South that shut wells and oil refineries in Texas.
Prices have been buoyant for months, with major oil producing countries restricting supply and vaccines rolling out to combat the coronavirus pandemic.
U.S. West Texas Intermediate (WTI) crude futures settled up 1% to $60.05, after touching their highest since early January 2020. Brent settled up 5 cents, or 0.1%, to $63.35 a barrel, near the 13-month peak reached the previous session.
“Cold temperatures have added supply side support amidst numerous well freeze-offs and several refinery disruptions as some facilities have seen forced shutdowns due to power restriction,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Rystad Energy analysts estimated that between 500,000 and 1.2 million barrels of crude oil production in the United States will be shut due to the cold. About 3 million bpd of refining has been closed, with some of the largest U.S. refiners shutting processing, including Motiva Enterprises facilities at Port Arthur, Texas, the country’s largest.
Middle East supply concerns also rose after the Saudi-led coalition fighting the Houthi group in Yemen said on Monday that it had destroyed an explosive-laden drone fired by the Houthis at the kingdom, the world’s biggest oil exporter.
Supply is expected to expand this spring as OPEC+ oil producers said they are likely to ease output curbs after April given a recovery in prices. Still, producers remain cautious about the pandemic. [nL8N2KA5FH]
U.S. oil inventory data from the API industry association and Energy Information Administration (EIA) will be released on Wednesday and Thursday respectively, delayed due to the Monday U.S. holiday.