What began as a power issue for a handful of U.S. states is rippling into a shock for the world’s oil market.
More than 4 million barrels a day of output — almost 40 per cent of the nation’s crude production — is now offline, according to traders and executives. One of the world’s biggest oil refining centers has seen output drastically cut back. The waterways that help U.S. oil flow to the rest of the world have been disrupted for much of the week.
“The market is underestimating the amount of oil production lost in Texas due to the bad weather,” said Ben Luckock, co-head of oil trading at commodity giant Trafigura Group.
Brent crude briefly surged above US$65 a barrel on Thursday, a level not seen since last January. Spreads indicating supply tightness also soared. Ten months ago, the price slumped below US$16 because of a demand shock caused by COVID-19.
In the past, the weather-related disruption would largely have been a U.S. issue. Now it’s unmistakably global. Crude markets in Europe are rallying as traders replace lost U.S. exports. OPEC and its allies must decide how much longer they keep millions of barrels of their supply off the market.
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