Oil prices extended gains for a fourth session on Thursday to reach the highest levels in more than 13 months, underpinned by an assurance that US interest rates will stay low, and a sharp drop in US crude output last week due to the storm in Texas.
Brent crude futures for April gained 33 cents, or 0.49%, to $67.37 a barrel, while US West Texas Intermediate (WTI) crude for April was at $63.45 a barrel, up 23 cents, or 0.36%.
Both contracts hit their highest since January 8, 2020 earlier in the session with Brent at $67.70 and WTI at $63.79. The April Brent contract expires on Friday.
An assurance from the US Federal Reserve that interest rates would stay low for a while weakened the US dollar, while boosting investors’ risk appetite and global equity markets.
A severe winter storm in Texas has caused US crude production to drop by more than 10%, or one million barrels per day (bpd) last week, the Energy Information Administration said on Wednesday.
“Combined with a dovish Jerome Powell and an already tight physical market, oil prices exploded higher,” Jeffrey Halley, senior market analyst for Asia-Pacific at Oanda, said.
Fuel supplies in the world’s largest oil consumer could also tighten as its refinery crude inputs had dropped to the lowest since September 2008, EIA’s data showed.
ING analysts said US crude stocks could rise in weeks ahead as production has recovered fairly quickly while refinery capacity is expected to take longer to return to normal.
Barclays, which raised its oil price forecasts on Thursday, said it is seeing staying power in the recent oil price rally on a weaker-than-expected supply response by US tight oil operators to higher prices.
“However, we remain cautious over the near term on easing OPEC+ support, risks from more transmissible Covid-19 variants and elevated positioning,” Barclays said.
The Organisation of the Petroleum Exporting Countries and their allies including Russia, a group known as OPEC+, is due to meet on March 4.
The group will discuss a modest easing of oil supply curbs from April given a recovery in prices, OPEC+ sources said, although some suggest holding steady for now given the risk of new setbacks in the battle against the pandemic.
Extra voluntary cuts by Saudi Arabia in February and March have tightened global supplies and supported prices.