Oil prices jumped after production and processing of raw materials were interrupted by a cold snap in Texas.
To put it more precisely, April Brent futures rose by 0.52% and hit $ 63.63 per barrel, and March WTI futures increased by 1.38% and reached $ 60.29 per barrel. Meanwhile, natural gas futures from the Henry Hub terminal jumped 4.3% and cost $ 3.04 per million BTU.
This cold snap in the United States has led to the shutdown of some of the largest refineries in Texas. For example, on Tuesday night, factories of Motiva and Exxon Mobil were temporarily stopped. Meanwhile, Total has minimized refining and shut down a factory at its Port Arthur plant. The day before, the media reported that production in the Permian Basin has dropped by 1 million barrels per day.
Experts believe that because of this event, WTI crude could hit $ 65 per barrel. They also do not see any sudden factor that can stop this rally. As a matter of fact, demand for oil is steadily increasing, while OPEC has reduced production by millions of barrels per day.
The significant decline in COVID-19 incidence, as well as progress in vaccination, also adds to the optimism of traders. Many are now anticipating a speedy recovery amid improvement in the global coronavirus situation.
Now, this increased cost of oil is driving the average retail price of gasoline in the United States. As of Monday, price has grown to above $ 2.50 per gallon, which was the highest price more than a year ago. Experts believe that car owners should prepare for further price increases in the coming months.
In line with this, representatives of Uninterruptible Power Supply (UPS) called for a rotating power outage. The move was intended to help avoid global blackouts. In addition, Texas residents were advised to reduce their electricity use. Hence, on Sunday evening, demand was at 69,150 MW.
This increase in demand then caused a jump in the cost of the spot market in some regions. So, last weekend, natural gas prices in Midwest increased to $ 500 per million BTU, while in the Rocky Mountains region, they crossed $ 100 per million BTU.
This spectacular rally is further proof that the market is instantly responsive to extreme weather changes. Earlier, a severe cold snap in northeast Asia forced local utilities to quickly fill the LNG deficit, which has skyrocketed to historic highs in the region.
But the main question is whether OPEC will reduce its production cuts because of this event. Analysts predict that Saudi Arabia will refuse to extend the additional cut that was effective since January this year.
