Freezing weather in portions of the U.S. has fostered the demand for fuel while simultaneously threatening to hamstring oil production in Texas.
Freezing weather conditions across the U.S. sparked another rally in energy prices Monday and put West Texas Intermediate crude on pace to settle above $60 a barrel for the first time since the early days of the coronavirus pandemic.
WTI crude futures rose 67 cents, or 1.1%, to $60.14 a barrel Monday morning. The jump brings WTI crude futures up 24% so far in 2021. It touched $60.77 a barrel earlier in the session, its highest level since January 2020.
Brent crude, the international benchmark, climbed 1.3% to $63.26 after hitting its own 13-month high.
Yet the extreme weather fostering additional demand for power and fuel is simultaneously threatening to hamstring production in Texas.
“Winter storm and the arctic blast of cold weather that is making its way south to Houston may have some severe impacts on the oil industry,” oil analyst Andy Lipow wrote over the weekend. “Frigid weather means that many oil wells may be shut-in. Water is produced along with oil, that water can freeze up equipment.”
More than 150 million Americans are currently under some category of winter weather advisory, according to the National Weather Service with a “major winter storm” expected to dump heavy snow and significant ice from the southern plains and Ohio Valley into the Northeast as of Monday.