Oil Prices Climb to New 7-Year High Above $91 a Barrel

Date: 04 February 2022 - 21:28

News ID: ۹۹۶۴۸

NEW YORK (Market Watch) - Crude marked a fresh seven-year high above $91 a barrel on Friday, as a harsh winter storm raged in the U.S., piling onto a myriad of worries about supply.
“The latest upswing was triggered by a cold snap in Texas, which is fueling concerns about production outages in the Permian Basin, the largest U.S. shale play. A year ago, a period of extreme cold weather had caused massive disruptions to oil production there,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note to clients.
About 350,000 homes and businesses in states such as Tennessee, Arkansas and Texas were without power in the U.S. on Friday, due to a winter storm that brought amid freezing rain and snow. More heavy snow and ice was expected to hit the eastern portion of the country on Friday.
Texas Republican Gov. Greg Abbott said the state was holding up, with about 70,000 outages by Thursday morning, compared to a crippling storm last year that left 4 million without power.
West Texas Intermediate crude for March delivery climbed by $1.88, or 2.1%, to $92.15 a barrel, trading at a level last seen in October 2014, according to FactSet.
A day earlier, the contract settled up $2.01, or 2.3%, to settle at $90.72 a barrel on the New York Mercantile Exchange — the highest front-month contract finish since Oct. 6, 2014.
April Brent crude, the global benchmark, gained $1.86, or 2%, to $92.97 a barrel, following Thursday’s gain that took it 1.8% higher to $91.11 a barrel on ICE Futures Exchange. That Friday level, if it holds, would mark the highest settlement since Oct. 6, 2014, according to FactSet.
Fritsch said Commerzbank is lifting its Brent forecast for this year to $90 per barrel in the current quarter from $80. “This is due to the steep rise in the risk premium on account of the Russia-Ukraine conflict, which is only likely to diminish gradually. For this reason, we expect the oil price to be still elevated in the second quarter at $85 (previous forecast: $75),” he said, in a note to clients.
Stronger-than-expected demand, expected to regain its pre-pandemic level by midyear at the latest, is also a key reason. “What is more, OPEC+ has been unable for months to fully implement the agreed production hikes,” he said.
The Organization of the Petroleum Exporting Countries and its allies on Wednesday stuck with a plan to boost production by another 400,000 barrels a day in March.
“Recently, more and more countries have failed to meet their production targets,” said Fritsch. “Many of them are now close to the limits of their production capacity. The discrepancy between agreed and actual production is therefore likely to widen further in the coming months, assuming that Saudi Arabia and other countries with spare capacities do not step up their production to a greater extent.”
Economic data will be in focus for Friday, with investors bracing for what could be the worst U.S. jobs report in more than a year, due to a record wave of coronavirus case, with just 150,000 jobs expected to have been created in January. Economists warned that the report could even show a drop in payrolls, as a result of the omicron variant, though any decline would likely be sharply reversed in February.