Oil prices jumped on Tuesday as the market priced in fundamentals once again, showing that when U.S. infrastructure gets punched in the face by weather, it’s more than geopolitics and vague supply forecasts that move the needle.
Brent was trading around $66.90 a barrel on Tuesday late morning, up about $1.30 on the day. At the time, WTI neared $61.90. By afternoon, the gains continued, with Brent passing $67 and WTI nearing $62. The continued rise means it could be more than just a recovery from an earlier dip. It may be recalculating near-term supply risk.
The immediate spark was the winter storm that clipped U.S. production and snarled Gulf Coast logistics. Analysts and traders estimated that as much as 2 million barrels per day (bpd) of production went offline over the weekend amid severe weather. Crude export flows from Gulf Coast ports even hit zero on Sunday before bouncing back as channels reopened, analysts estimated. Exports have become the pressure-release valve for the U.S. system, and when the valve shuts, even briefly, U.S. supply stops being seen as infinitely flexible.
But the rally wasn’t just a weather headline. A second, cleaner catalyst is that the global supply backdrop is already tight enough that any disruption looks bigger. Kazakhstan’s Tengiz field is recovering more slowly than expected after a fire and power outage, with less than half of normal production restored heading into early February, per Reuters reporting. Layer on a softer U.S. dollar, and crude gets an extra shove higher on the screen.
Then there’s the ever-present geopolitical bid. U.S. naval assets moving into the Middle East doesn’t guarantee anything happens, but it does raise the “things could get messy” premium, especially with Iran in the frame and no clean progress on the Russia-Ukraine front.
By Julianne Geiger for Oilprice.com
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