By Peter Nurse
Investing.com -- Crude oil prices settled up again Tuesday, extending their recent gains as wintry conditions hit production in Texas, the biggest energy producing state in the United States.
U.S. crude futures settled up 58 cents, or 1%, at $60.05 a barrel. International benchmark Brent fell 0.3% to $63.12, both contracts having earlier climbed five cents to finish Tuesday's official trading session at $63.35.
An unprecedented cold snap in the U.S. has halted oil wells and refineries, particularly in Texas, with natural gas and crude pipeline operators also facing restrictions.
As much as 1 million barrels a day of crude oil production has been affected by the winter storm, Bloomberg reported, while power outages have also had an impact on pipeline flows and refinery operations.
This has crippled the country’s power system, plunging nearly 5 million people across the U.S. into darkness, with regions taking turns at being deprived of power.
“Parts of Texas will see winter storm warnings stay in place until Thursday morning,” said analysts at ING, “with freezing temperatures expected to remain until then. This should continue to offer support to the market.”
Oil prices were already heading higher, before receiving this cold weather boost, helped by the expectations of additional U.S. stimulus as well as global vaccinations programs boosting demand, while supply is curtailed by the lack of new investment in the sector. This is beginning to result in talk of a ‘supercycle’.
“Based on the technical outlook, oil prices could rally to $70-72/barrel, which are the peaks of September 2019 and January 2020. However, based on fundamental analysis, the case for further price gains is hard to make, although we are seeing optimism in financial markets in general,” said analysts at ABN Amro, in a research note.
Keenly watched U.S. oil inventory data from the API industry association and Energy Information Administration will be released this week on Wednesday and Thursday, respectively, each delayed by a day after U.S. markets were closed on Monday.