Oil prices declined on Tuesday even as a major winter storm in the United States curtailed crude production and affected refining operations on the U.S. Gulf Coast.
At 0145 GMT, Brent crude futures were down 28 cents, or 0.4%, trading at $65.31 a barrel. U.S. West Texas Intermediate (WTI) crude fell 24 cents, or 0.4%, to $60.39 a barrel.
Analysts and traders estimated that U.S. oil producers lost as much as 2 million barrels per day over the weekend - roughly 15% of national production - as the winter storm moved through the country. The extreme weather strained energy infrastructure and power grids, contributing to the output curtailments.
In addition to production outages, several refineries along the Gulf Coast reported operational issues linked to the freezing conditions. Daniel Hynes, an analyst at ANZ, noted that the refinery problems added to concerns about potential fuel supply interruptions.
Geopolitical developments also factored into market thinking. Two U.S. officials said a U.S. aircraft carrier and supporting warships have arrived in the Middle East, expanding President Donald Trump’s ability to defend U.S. forces or to potentially take military action against Iran. Hynes observed that supply risks had not fully dissipated, citing persistent tension after the deployment of naval assets to the region.
Separately, members of the Organization of the Petroleum Exporting Countries and allies, collectively known as OPEC+, are due to meet on February 1. Three OPEC+ delegates indicated that eight members of the group are expected to maintain the current pause on output increases for March. The eight members meeting are Saudi Arabia, Russia, UAE, Kazakhstan, Kuwait, Iraq, Algeria and Oman. Prices had been supported in part by a drop in Kazakhstan’s oil production.
The combination of weather-related supply setbacks, refinery interruptions and lingering geopolitical risk left markets with mixed signals. While tangible production losses and refinery reports pointed toward tighter near-term physical balances, price action reflected cautious selling amid broader market considerations.
Summary
Oil prices edged lower despite a significant U.S. winter storm that temporarily removed up to 2 million barrels per day of U.S. output and disrupted Gulf Coast refineries. Geopolitical tension following the arrival of U.S. naval forces in the Middle East and anticipated OPEC+ deliberations on production policy also influenced market sentiment.
Key points
- U.S. crude benchmarks fell modestly - Brent at $65.31/b and WTI at $60.39/b at 0145 GMT.
- U.S. producers are estimated to have lost up to 2 million barrels per day, about 15% of national production, due to the winter storm.
- OPEC+ delegates expect eight members to keep a pause on output increases for March; a reduction in Kazakhstan’s output supported higher prices prior to the pullback.
Risks and uncertainties
- Weather-driven supply disruptions: Continued extreme cold could prolong production outages and refinery problems, affecting the energy and downstream fuels sectors.
- Refinery operations: Gulf Coast refinery issues may lead to localized fuel supply tightness, impacting distribution and retail fuel markets.
- Geopolitical tension: The deployment of U.S. naval assets to the Middle East keeps a risk premium on supply, with potential implications for global oil markets and energy security.