Oil traded near a 13-month high as electricity blackouts caused by freezing weather in Texas disrupted flows from the biggest U.S. shale patch.
Futures in New York rose around 1% in Asia from Friday after the market didn’t close Monday due to a public holiday. The cuts have spread to the central U.S. and into Mexico in a deepening crisis that’s already crippled the Texas power grid. Some of biggest refineries in North America were shut down Monday, with more than 3 million barrels of daily oil-processing capacity idled amid the record-setting cold, according to consultant Energy Aspects Ltd.
It’s the latest in a series of cold snaps that have provided a bigger-than-expected boost to oil consumption since the start of the year. The North Sea oil market, which helps price more than two-thirds of the world’s crude, also saw its biggest spate of bullish activity in years. Traders lined up to place bids for 20 cargoes in the market, with virtually all of them going unanswered.
The American crude benchmark has climbed 24% so far this year after Saudi Arabia announced deep output cuts, helping swollen global stockpiles to normalize even as the rapid spread of Covid-19 led to more lockdowns. The global oil market is “balanced”, with prices reflecting the current state of play, Russia’s Deputy Prime Minister Alexander Novak said Sunday.
Still, concerns remain over the sustainability of crude’s rally. WTI futures’ 14-day Relative Strength Index remains well above 70 in a sign that the commodity is due for a pullback. The threat of new virus strains around the world and a resurgence that’s hampering travel in China may cap what’s been a dramatic recovery in fuel consumption. The International Energy Agency cut its demand forecast for 2021 last week and described the market as fragile.