Brent 1st-nearby prices are back near their recent highs, above $91.5/b, while WTI is at a 7-year high near $91/b, as the cold snap hits Texas. The Brent-WTI spread is narrowing sharply.
The severe cold increases heating demand but also affects oil production and transportation in the Permian Basin, which accounts for about 40% of total US production. At this stage, the disruptions seem to be relatively limited, but the low level of stocks means that the slightest disruption in the market will put additional pressure on prices.
Apart from that, the context remains unchanged with geopolitical tensions adding a risk premium to prices in a fundamentally tight market, which has not been altered by OPEC’s decision to continue increasing production. With regard to Russia, it is worth noting that US diesel imports from Russia are at their highest level in 3 years to supply the East Coast, which has also been hit by a severe cold snap. We await the Baker Hughes rig count today for an indication of US shale oil activity.
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