Crude oil prices find support from the harsh winter in the US
- WTI and Brent futures dropped by 0.90% and 0.54% respectively, but remained close to Monday's record high.
- Frigid conditions in Texas have disrupted operations in crude oil refineries, wells, and pipelines.
- Fear of rising tensions in the Middle East heightens as Houthi targets the kingdom
Crude oil prices traded lower on Tuesday, following the cancellation of the strike by employees at Norway’s largest oil port. However, the prices are still near the record set on the previous day. WTI futures dropped by 0.90% to trade at $59.57. Brent futures were also down by 0.54% at $62.94. On Monday, WTI futures were at the highest level since January 2020. The overall uptrend is due to the extreme winter conditions in the US and fear of rising tensions in the Middle East.
Cold snap in the US
Crude oil prices are rallying as Southern and central states within the United States continue to experience a harsh winter storm. Texas, which is the largest crude oil-producing region in the country is one of hardest hit.
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It has 31 oil refineries; making it the state with the most entities in the country. Besides, some of these refineries are the largest in the nation. In terms of production, Texas’ output is about 4.6 million bpd. Based on these numbers, major disruptions in the state are bound to disrupt crude oil supply in the region.
As of Monday, around 4 million residences and commercial stores experienced power outage following disruptions on crude oil and natural gas pipelines. Furthermore, the frigid conditions have halted operations in the region’s crude oil refineries and wells. This is the worst winter that Texas and other states have recorded for decades. Notably, meteorologists have warned that the extreme winter will continue over the coming days.
Fear of rising tensions in the Middle East
The rallying of crude oil prices is also a reaction to the ongoing fears over tensions in the Middle East. According to the Saudi-led alliance that has camped in Yemen, Houthi rebels’ recent target was the Abha airport situated in the southwestern region of Saudi Arabia. However, the coalition has stated that it managed to intercept the fired drone.
The coalition’s goal is to concur the Houthi militia aligned to Iran and reinstate the Yemeni government. With Saudi Arabia being the second-largest crude oil producing country in the world, the tensions have supported the commodity’s prices.
Crude oil prices’ capped gains
While crude oil prices are still hovering close to yesterday’s record level, the turn of events in Norway has eased the fear of tight supply in Europe. Investors looking to trade oil had their eyes on the expected workers’ strike at the country’s major oil port. The protests would have affected the Mongstad terminal and key offshore oil fields. Subsequently, it would have disrupted crude oil production in the region by one-third.
Norway is the largest producer of crude oil in Western Europe. The country’s output is at about 2.1 million bpd. Fortunately, the Safe labor union reached an agreement with the sector’s employers on Tuesday.