Oil prices jump 3% after US winter storm disrupts production
Oil prices ended Tuesday (January 27) about 3% higher after a powerful winter storm disrupted US crude output and briefly shut down Gulf Coast export flows, while slower-than-expected recovery at Kazakhstan’s Tengiz field and renewed Middle East tensions added to supply concerns.
Brent crude futures climbed US$1.98, or 3.02%, to settle at US$67.57 a barrel.
US West Texas Intermediate (WTI) rose US$1.76, or 2.9%, to US$62.39 a barrel.
Analysts and traders estimated US producers lost up to 2 million barrels per day, roughly 15% of national production, over the weekend as the storm strained energy infrastructure and power grids.
Fawad Razaqzada, market analyst at City Index, said extreme weather had lifted crude futures, with near-term risks skewed higher on fears of supply disruptions.
PVM oil analyst Tamas Varga said the cold spell could lead to sizeable drawdowns in oil inventories in the coming weeks, particularly if the weather persists.
US Gulf Coast exports of crude oil and liquefied natural gas fell to zero on Sunday amid freezing conditions, according to ship-tracking service Vortexa.
Flows rebounded on Monday, rising above seasonal norms as ports reopened, said Samantha Santa Maria-Hartke, Vortexa’s head of market analysis.
Supply worries were also shaped by Kazakhstan, where the giant Tengiz oilfield is expected to restore less than half of normal output by February 7 as it recovers from a fire and a power outage, two sources familiar with the matter told Reuters.
Giovanni Staunovo, an analyst at UBS, said the slower recovery was keeping the market tighter, while noting that a weaker US dollar was also providing some support.
In a partial offset, the CPC consortium, operator of Kazakhstan’s main export pipeline, said it had returned to full loading capacity at its terminal on Russia’s Black Sea coast after maintenance work was completed at one of its three mooring points.
Middle East tensions underpin prices
Oil also found support from heightened geopolitical risk.
A US aircraft carrier and accompanying warships have arrived in the Middle East, two US officials told Reuters on Monday, expanding President Donald Trump’s options to defend US forces or potentially take military action against Iran.
Razaqzada said tensions were rising after Trump said last week the US had an “armada” heading towards Iran, helping keep prices supported in the near term.
Dennis Kissler, senior vice president of trading at BOK Financial, said friction between Tehran and Washington, alongside the lack of news on a Ukraine-Russia peace deal, was helping to keep a floor under crude prices.
Meanwhile, OPEC+ is expected to maintain its pause on planned output increases for March at a meeting on February 1, three OPEC+ delegates told Reuters.
Reuters
