Oil Rises Again, Risk of US Supply Disruption Still Looms
Oil prices continued to strengthen on Wednesday (January 28th), as supply concerns persisted after winter storms disrupted US crude production and exports. Tensions in the Middle East also provided additional support. Brent futures rose 11 cents, or 0.2%, to $67.68 per barrel at 07:25 GMT, while US West Texas Intermediate (WTI) rose 19 cents, or 0.3%, to $62.58 per barrel. Both had surged about 3% on Tuesday.
Analysts and market participants estimate that US producers lost up to 2 million barrels per day, or about 15% of total national production, over the weekend after the storms strained energy infrastructure and the power grid. Crude oil and liquefied natural gas (LNG) exports from US Gulf Coast ports even dropped to zero on Sunday, according to the Vortexa ship tracking service. Besides the US, reduced production in Kazakhstan also supported the rally, said Toshitaka Tazawa, an analyst at Fujitomi Securities. However, he cautioned, "once supply concerns ease, selling pressure is likely to return." Tazawa added that with a projected global oil supply surplus this year—amid geopolitical risks including Middle East tensions—WTI is likely to remain around $60 per barrel for the time being.
From Kazakhstan, the country's largest oil field, Tengiz, is expected to recover less than half of its normal production by February 7 as the recovery process progresses slowly following a fire and power outage, according to two sources familiar with the situation. However, this was partially offset by a statement by pipeline operator CPC—which handles about 80% of Kazakhstan's oil exports—that loading capacity at its Black Sea terminal had returned to full capacity after maintenance at one of its three berths was completed.
Supply concerns persist amid Middle East tensions
Two US officials said on Monday that a US aircraft carrier and support vessels had arrived in the Middle East. This move increases President Donald Trump's options for protecting US troops, or potentially taking military action against Iran. ANZ analysts believe the situation increases the likelihood of Trump following through on his threat to attack senior Iranian leaders in response to the crackdown on nationwide protests. On the supply side, OPEC+ (OPEC, along with Russia and its allies) is expected to maintain its pause on production increases for March at its meeting on February 1, according to three OPEC+ delegates.
Market participants are also closely monitoring the direction of US energy inventories. A Reuters survey forecasts US crude oil and gasoline stocks rising in the week ending January 23, while distillate (such as diesel) inventories are expected to fall. However, market sources citing American Petroleum Institute (API) data stated that crude oil and gasoline stocks actually fell last week, while distillate inventories rose.
Source: Newsmaker.id
