Oil prices rose this Wednesday as the freezing wave in Texas curtailed oil production in the nation’s biggest oil producing state; reports by Saudi Arabia’s plans to increase output in the coming months was also a factor for the increase.
As we reported previously, during the last weekend, a freezing storm, coming from the south of Canada, hit Texas and its energy assets; it froze wind turbines, oil wells, and pipelines alike and sent electricity and natural gas prices to the roof.
Amid this uncertain landscape, Benchmark Brent crude gained 33 cents, 0,5% and closed at $63,68 per barrel; while the U.S. basket, the West Texas Intermediate, rose 17 cents, 0,3%, to $60,22 a barrel.
During the first months of 2021, oil prices kept surging from below $50 a barrel levels, after being severely hit by the covid-19 pandemic; however, cuts in production by the Organization of Petroleum Exporting Countries (OPEC) and the vaccine rollout pushed oil prices to their recovery and surpassed the $60 per barrel mark in January.
Now, historic cold weather in Texas has propelled prices eve higher in recent days. “Crude oil WTI will probably max out somewhere pretty close to $65.65; also, refinery utilization rate will probably slide to somewhere around 76%;” said Bob Yawger, director of energy futures at Mizuho in New York.
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OPEC may increase production
In addition, the Wall Street Journal reported that OPEC and Saudi Arabia were planning on increase oil output; just after their next meeting next month; which prompted prices even higher, as investors expect bigger demand.
Nevertheless, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman, said it was early too declare victory against the pandemic, and that oil producers should proceed “extremely cautious.”
“We are in a much better place than we were a year ago; however I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event,” he said, quoted by Reuters.
Experts coincide that, in March 4, when the next OPEC+ meeting takes place, an ease in production cuts will be declared; also, a new one, in April, given the recovered prices.
In conclusion, frigid temperatures at Texas, which curtailed production; in addition to bigger draws in oil inventories and OPEC hopes for increased output, are pushing oil prices to their highest since last year.