News: Oil prices rise as output in storm-hit U.S. begins slow return.
TOKYO (Reuters) – Oil prices rose Monday as the slow return in US crude oil production, curbed by cold conditions, served as a reminder that supply was tight as demand recovered from the depths of the COVID-19 pandemic .
Brent crude rose 55 cents, or 0.9%, to $ 63.46 a barrel by 0742 GMT, after rising nearly 1% last week. US oil rose 47 cents, or 0.8%, to $ 59.71 a barrel after falling 0.4% last week.
Prices also got a boost after investment bank Goldman Sachs Brent raised its price forecast by $ 10, expecting it to hit $ 70 in the second quarter and $ 75 in the third quarter.
“We now forecast that oil prices will rise sooner and higher due to lower expected inventories and higher marginal costs – at least in the short term – to resume upstream activity,” wrote Goldman analysts.
“The better than expected demand and the still depressed supply resulted again in a larger deficit than expected,” they said.
Unusually cold weather in Texas and the Plains has forced the cessation of crude oil production of up to 4 million barrels per day (bpd) along with natural gas production of 21 billion cubic feet, analysts estimated.
It will likely take several days for the oil field crews to defrost the valves, restart the systems, and begin oil and gas production. U.S. Gulf Coast refineries are assessing the damage and it can take up to three weeks to restore most of their operations, analysts said, though this is hampered by low water pressure, gas and electricity losses.
“With three-quarters of fracking crews resigning, the likelihood of a quick resumption is slim,” ANZ Research said in a note.
“Longer term, the decline in capital spending at US shale oil companies this year will keep drilling activity muted, causing production to remain below pre-pandemic levels.”
For the first time since November, US drilling companies have reduced the number of oil rigs operating due to the cold and snow in Texas, New Mexico and other power generating centers.
Reporting by Aaron Sheldrick; Arrangement by Clarence Fernandez and Christopher Cushing
Original Source © Reuters