By Peter Nurse
Investing.com -- Crude oil prices posted strong gains Monday, boosted by the wintry conditions in the central U.S. triggering extra demand for heating oil while also disrupting supplies of crude.
By 4:35 AM ET (0935 GMT), U.S. crude futures traded 1.9% higher at $60.59 a barrel, while the international benchmark Brent contract rose 1.4% to $63.28, both contracts climbing to their highest levels since January last year.
U.S. Gasoline RBOB Futures were up 1.2% at $1.7125 a gallon.
An Arctic air mass gripped much of the United States over the weekend, including Texas, prompting the state’s grid operator, Electric Reliability Council of Texas, to implement rolling blackouts across the state, citing record-breaking energy demands due to the extreme cold.
Wind farms in West Texas, stricken by weekend ice storms, were particularly hard hit, severely reducing the output for the state’s second-largest source of energy.
“Looking ahead, and the forecast shows that this colder than usual weather will be around for much of the week, and so should continue to be supportive for both gas and oil prices, particularly if we do see significant supply disruptions,” said analysts at ING, in a research note.
Coupled with this, tensions are rising in the Middle East after Saudi Arabian state TV reported that the kingdom had intercepted and destroyed an explosive-laden drone fired from Yemen.
Oil prices have rallied over recent weeks, helped by the expectations of additional U.S. stimulus while vaccinations programs heat up, raising hopes that stringent lockdown policies, mainly in Europe, can be lifted in the near future.
Additionally, supplies have tightened largely because of production cuts from the Organization of the Petroleum Exporting Countries and allied producers, a grouping commonly known as OPEC+.
That said, global oil markets are now balanced following last year’s coronavirus-induced collapse in demand, said Alexander Novak, Russia’s deputy prime minister, according to Interfax Monday.
Traders will now have to listen very carefully to what the Russians have to say on the state of the market ahead of the OPEC+ meeting in early March, as the group will have to decide what to do with production cuts from the start of April.
“Clearly if the Russians believe that the market is balanced, there is a good chance that they push for a more aggressive easing. However, OPEC+ will be keen to avoid a repeat of the meeting in March last year, when the previous deal fell apart,” added ING.