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Oil Prices Extend Rise as Texas Disruptions Continue

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.

Source: Marketwatch

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