Brent gives up gains after rising above $65 on Texas freeze

FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County
FILE PHOTO: The sun is seen behind a crude oil pump jack in the Permian Basin in Loving County, Texas, U.S., November 22, 2019. REUTERS/Angus Mordant/File Photo

February 18, 2021

By Ahmad Ghaddar

LONDON (Reuters) – Oil prices erased early gains on Thursday, with Brent retreating from a 13-month high above $65 a barrel as buying spurred by concerns that a rare cold snap in Texas could disrupt U.S. crude output for days or even weeks petered out.

Brent crude was down 18 cents, or 0.3%, at $64.16 a barrel at 1516 GMT, after rising to $65.52 earlier in the session, its highest since Jan. 20, 2020.

U.S. West Texas Intermediate (WTI) crude futures fell 23 cents, or 0.4%, to $60.91 a barrel, after earlier rising to $62.26, the highest since Jan. 8, 2020.

“Even though oil price gains now have been scaled back to just around yesterday’s close, prices reached new highs this morning supported by production cuts in the U.S.,” Rystad Energy head of shale research Artem Abramov said.

Texas’ freeze entered a sixth day on Thursday, as the largest energy-producing state in the United States grappled with refining outages and oil and gas shut-ins that rippled beyond its borders into neighbouring Mexico.

About 4 million barrels of daily refining capacity has been shuttered and at least 1 million barrels per day of oil production is also out.

“The temporary outage will help to accelerate U.S. oil inventories down towards the five-year average quicker than expected,” SEB chief commodities analyst Bjarne Schieldrop said.

Prices also gained support from a larger-than-anticipated draw in the U.S. crude oil inventories.

U.S. crude oil stocks fell by 5.8 million barrels in the week to Feb. 12 to about 468 million barrels, compared with analysts’ expectations for a draw of 2.4 million barrels, American Petroleum Institute data showed.

U.S. Energy Information Administration (EIA) oil inventory data will be released later on Thursday, delayed by a day after a holiday on Monday. [EIA/S]

Oil’s rally in recent months has also been supported by a tightening of global supplies, due largely to production cuts from the Organization of the Petroleum Exporting Countries (OPEC) and allied producers in the OPEC+ grouping that includes Russia.

OPEC+ sources told Reuters the group’s producers are likely to ease curbs on supply after April given the recovery in prices.

(Additional reporting by Yuka Obayashi in TOKYO; editing by Barbara Lewis and Emelia Sithole-Matarise)