NEW YORK: Oil prices gained about 3% on Monday on the slow return of U.S. crude output cut by abnormally frigid conditions and as an approaching meeting by top global producers is expected to keep production largely reined in.
Brent crude was up $1.65, or 2.6%, at $64.56 a barrel by 12:07 p.m. (1707 GMT) U.S. oil rose $1.80, or 3%, to $61.04 a barrel.
A deep freeze in Texas and the U.S. Midwestern states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.
Shale oil producers in the region could take at least two weeks to fully restart normal output, sources said, as frozen pipes and power supply interruptions slow their recovery.
“We believe that both the crude and gasoline markets have yet to fully discount last week’s sizable reduction in Gulf coast crude production as well as a major decline in refinery activity,” said Jim Ritterbusch of consultancy Ritterbusch and Associates.
“The significant loss of both crude and gasoline production suggests more upside and likelihood of new highs possibly within a one-week time frame,” he said.
For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres, signalling even tighter supplies ahead.
OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.
“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.