(Bloomberg) -- Oil held above $60 a barrel in Asia as a deepening energy crisis in the U.S. took out around a third of the country’s crude production.
Futures in New York were steady after settling up 1% on Tuesday from Friday’s close. Freezing temperatures have caused power cuts across the central U.S., curtailing 3.5 million barrels a day or more of output, according to traders and industry executives. More than 3 million barrels a day of refining capacity has also been idled, consultant Energy Aspects Ltd. has estimated.
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The crisis in one of the world’s largest oil producers is buoying global prices and has spurred a rush for fuels, with U.S. gasoline futures jumping almost 5% on Tuesday. But the loss of demand from disrupted refineries has also pushed West Texas Intermediate futures’ prompt timespread back into a bearish contango structure for the first time in about a month.
While it’s unclear how long the cold snap in the U.S. will last, the impact on global prices will probably be short-lived. Crude will then go back to trading on fundamentals, with supply discipline from OPEC+ and a gradual improvement in demand as vaccines are rolled out likely to keep supporting the market.
In Russia, meanwhile, freezing temperatures are also contributing to production curtailments. The expected increase in Russia’s February oil output has so far not materialized, as some fields curb pipeline flows due to abnormally cold weather.
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