Oil futures rose Wednesday, extending gains seen as freezing weather extending as far south as Texas continues to shut in production and keep refineries closed.
More than 2 million barrels a day of U.S. oil output have been shut down, mostly in Texas, the largest oil-producing state, said analysts at Commerzbank. The hit to refinery operations, however appears to be even greater, they said, shutting off as much as 3 million barrels a day, they noted.
West Texas Intermediate crude for March delivery the U.S. benchmark, was up 85 cents, or 1.4%, at $60.90 a barrel on the New York Mercantile Exchange, a day after closing above $60 for the first time since January 2020. April Brent crude, the global benchmark, rose $1.01, or 1.6%, to $64.36 a barrel on ICE Futures Europe.
Natural-gas futures edged lower after Tuesday’s jump, off 0.2% at $3.122 per million British thermal units.
The shutdown of refineries, however, was seen pushing WTI into contango, a condition in which nearby oil prices trade below later dated futures, for the first time in more than seven months, the Commerzbank analysts noted
The deep freeze has accelerated a rally in crude driven by optimism over vaccine rollouts and falling COVID-19 cases, which boosted expectations for a broader economic recovery.
Output cuts by the Organization of the Petroleum Exporting Countries and its allies, a group known as OPEC+, have also contributed to the positive tone, enhanced by Saudi Arabia’s unilateral decision to cut its production by 1 million barrels a day in February and March.
The crude rally, however, is seen leading to pressure to further relax output curbs, perhaps as early as meetings in early March.