Oil Prices Rise To New Pandemic Highs Amid Texas Cold Snap
Oil is trading at its highest level in more than a year as freezing weather in West Texas and the Permian Basin sends demand soaring and limits production, but the global market is not likely to see a lasting boost until the second half of the year.
West Texas Intermediate crude futures, the American oil benchmark, rose 1.9% to trade at $60.61 per barrel on Monday—its highest level in more than a year.
Brent crude, the international benchmark, rose 1.3% on Monday to $63.25 per barrel.
Those gains in the U.S. market come amid the coldest weather the Permian basin has seen in decades.
The weather has turbo-charged demand for fuel and electricity in the region but also forced production slowdowns.
Traders and industry executives are estimating that production in the region has declined by as much as one million barrels per day, Bloomberg reported, but those supply constraints are expected to be temporary.
The broader market is looking ahead to the rollout of vaccines across the globe and the economic recovery promised by fresh rounds of fiscal stimulus, both of which should help demand for fuel and global travel rebound to pre-pandemic levels. That optimism has been tempered in the near-term by more contagious variants of the virus that are circulating worldwide.
“The rebalancing of the oil market remains fragile in the early part of 2021 as measures to contain the spread of Covid-19, with its more contagious variants, weigh heavily on the near-term recovery in global oil demand,” the International Energy Agency wrote in its February oil market report. The IAE expects the recovery in demand for oil to pick up in the second half of 2021.
What To Watch For
After an all-out price war between Saudi Arabia and Russia helped tank oil prices last year, the members of the OPEC+ cartel this year agreed to production cuts to limit supply and help the market recover. “They are likely to stop that, now that prices are above $60 a barrel,” Carole Nakhle, chief executive of Crystol Energy, told the Wall Street Journal Monday.
Cold Weather Cuts Permian Oil Output by 1 Million Barrels a Day (Bloomberg)
Oil Rebounds Above $50 For The First Time In Months As Saudi Arabia Says It Will Cut Production By 1 Million Barrels A Day (Forbes)
Biden To Freeze New Oil And Gas Leasing On Federal Land (Forbes)