Oil jumps $1/bbl as Texas freeze prompts U.S. output drop

 1 / 2

Oil jumps $1/bbl as Texas freeze prompts U.S. output drop

FILE PHOTO: A 3D printed oil pump jack is placed on dollar banknotes in this illustration picture

CL=F

+0.46%

NEW YORK (Reuters) - Oil prices gained more than $1 a barrel on Wednesday, as frigid Texas temperatures shut production across the largest U.S. crude producing state, with the unusually cold weather expected to hamper output for days or even weeks.

Brent crude settled at $64.34 a barrel, gaining 99 cents, or 1.6%, while U.S. West Texas Intermediate (WTI) crude settled at $61.14 a barrel, rising $1.09, or 1.8%. Both benchmarks were at their highest levels since January last year.

Oil has been supported by OPEC+ supply curbs, Saudi Arabia's additional cuts and hopes of a demand rebound due to COVID-19 vaccinations.

Historic cold weather since the weekend in Texas, which supplies the bulk of U.S. crude and is part of the main U.S. refining hub, has propelled prices even higher.

"This has just sent us to the next level," said Bob Yawger, director of energy futures at Mizuho in New York. "Crude oil WTI will probably max out somewhere pretty close to $65.65," Yawger said.

The U.S. deep freeze has shut an estimated 1 million barrels a day of production and is expected to disrupt production for several days if not weeks, industry experts said, as wellheads have frozen over and pipelines have shut.

At least a fifth of U.S. refining output has been knocked offline, which is hampering demand for crude at the same time production is down, said John Kilduff, partner at Again Capital in New York.

"There's a bit of a push-pull happening because even though the supplies are shut in, the refiners are also down so there's not much of a call for it," Kilduff said.

Unlike the hurricanes that can violently strike U.S. Gulf Coast oil operations, Kilduff said he doesn't expect infrastructure damage from the freezing temperatures.

"This will all thaw out and things should ramp up rather quickly," he said.

In a statement that helped ease fears that OPEC and allied oil producers would announce plans to raise output after meeting next month, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said it was too early to declare victory against the COVID-19 virus and oil producers must remain "extremely cautious."

Quote Lookup

Symbol Last Price Change % Change

CL=FCrude Oil Mar 21 61.42 +0.28 +0.46%

TRENDING

1.

UK consumer spending weakens over week to Feb. 11: ONS

2.

UPDATE 1-Rally in mining stocks helps Europe shake off earnings gloom

3.

Rise of Retail Army Shrouds Half of Stock Trading in Secrecy

4.

UPDATE 1-Singapore, Indonesia say ASEAN can play important role in Myanmar

5.

Bank Indonesia Cuts Rates and Outlook as the Recovery Stalls