Oil hits pandemic high as winter storm pushes demand and poses production risk
Freezing weather in regions across the U.S. sparked another rally in energy prices and put West Texas Intermediate crude on pace to settle above $60 a barrel for the first time since the early days of the coronavirus pandemic.
WTI crude futures rose 62 cents, or 1%, to $60.09 a barrel Monday. The jump brings WTI crude futures up about 24% so far in 2021. It touched $60.77 a barrel earlier in the session, its highest level since January 2020.
Brent crude, the international benchmark, climbed 1.4% to $63.33 after hitting its own 13-month high.
The latest pop in the energy market came as cold weather racked portions of the U.S. and fostered demand for power and fuel while simultaneously threatening to hamstring production in Texas.
“Winter storm and arctic blast of cold weather that is making its way south to Houston may have some severe impacts on the oil industry,” oil analyst Andy Lipow wrote over the weekend.
“Frigid weather means that many oil wells may be shut in. Water is produced along with oil, that water can freeze up equipment,” he added. “The cold air affects oil production in Canada, North Dakota, Oklahoma, Texas and elsewhere.”
More than 150 million Americans are currently under some category of winter weather advisory, according to the National Weather Service. As of early Monday morning, the agency was predicting a “major winter storm” to dump heavy snow and significant ice from the southern plains and Ohio Valley into the Northeast.
Lipow, president of Texas-based Lipow Oil Associates, added that while the winter storm likely isn’t as severe as the Category 5 hurricanes the Gulf Coast has come to know, odds are good refineries will slow operations and prepare for outages.
He also noted that the storm is partly to blame for a steady rise in gasoline prices over the last week.
The average per-gallon price of regular gasoline rose to $2.46 from $2.41, according to the latest weekly report from the U.S. Energy Information Administration. Analysts expect that the EIA’s next weekly report, due Tuesday, will show that retail gas prices climbed further.
The recent rally in crude prices also marks an extension of the oil market’s rebound since the coronavirus pandemic gutted demand for petroleum products throughout much of 2020 and sent crude prices reeling in April.