Daily Market Recap - USOIL Relentless on the rise after poor weather conditions in the US

Driven since the low point of January 29 by investors' optimism regarding the recovery of the economy, and therefore the recovery of demand, oil prices continue to rise this Wednesday. Towards the end of the days session, the price of US WTI Oil rose by 2.62% to $61.70, the highest since January 8, 2020. The two world crude oil references have recovered respectively 16.7% (Brent) and 15% (WTI) from their recent lows of three weeks ago.

After the overall favorable climate for risky assets, it is now the extreme weather conditions, “at the center of attention of the crude oil markets” which is fuelling the continued rebound according to JBC analysts.

A cold spell is currently hitting the US. In the Texas capital, Austin, temperatures fell to -12 degrees Celsius on Tuesday, affecting oil production as many wells had to be shut down, not to mention power outages and other transportation disruptions. This situation “increases the demand for energy and at the same time disrupts supply in the main producing regions,” notes Stephen Innes of Axi, a perfect cocktail to drive up prices.

Carsten Fritsch, from Commerzbank, advances a volume of “more than 2 million barrels a day blocked, especially in Texas, which is by far the largest (American) oil-producing state”. Citigroup analysts estimate that “at least 16 million barrels” of Texas production will be lost by the beginning of March.

“The impact on crude oil prices will largely depend on the duration of the energy crisis, but eventually prices are likely to return to fundamentals by focusing on global energy demand and Opep+,” Margaret Yang, a strategist with DailyFX in Singapore, told Reuters.

This event adds to the bullish environment of crude oil prices, which have been recovering since the announcement of the first Covid-19 vaccines in early November and have accelerated since the beginning of the year, thanks in part to the continued control of production by OPEC members and their allies. “Attention will soon be focused on the OPEC+ meeting to be held in early March. The group will need to continue to present a united and disciplined front,” said Innes. ING analyst Warren Peterson, however, anticipates “a more conservative approach” from the cartel, which he says should “reduce production more modestly” than in recent meetings.

(Charts Source: Tradingview 17.02.2021)

It should be noted that the weekly publication of the state of crude oil stocks in the United States by the U.S. Energy Information Agency (EIA), usually on Wednesday, has been delayed by one day due to Monday's holiday.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.