The US WTI oil price crossed $90/bbl for the first time since 2014 amid growing concerns over extended winter storms across the United States, further stirring fears of crude shortages amid global constrained supply.
West Texas Intermediate crude settled at $91.72/bbl, while Brent crude traded at $92.43/bbl on Friday, February 4.
According to a report from S&P Global Platts, oil prices were pushed to new highs as media reports circulated claiming that a few Permian basin producers had shut operations on February 3 due to the frigid weather across the US.
“WTI crude surged over the $90/bbl level after an arctic blast made its way to Texas and disrupted some oil production in the Permian Basin,” Ed Moya, senior market analyst at OANDA told S&P.
Moya added: “The oil market is too tight and vulnerable to any shock. Even as thousands of flights are cancelled, the energy market is fixated [on] production and not so much short-term demand shocks.”
Oil prices have skyrocketed since the beginning of 2022. The Organisation of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, met on Wednesday, decided to retain production at the previously selected rate of 400,000 b/d. Experts noted that the decision was taken despite the group facing heavy pressure to increase daily output to curb snowballing prices.
S&P’s report stressed that the latest disruption would further compound fears of a widening supply deficit as demand continues to recover globally and OPEC producers struggle to raise output to adequate levels following extended shutdowns amid the COVID-19 pandemic.
The market will be keenly watching OPEC production quotas, as member states underperformed their production targets by 832,000 b/d in December, according to reports, with a few exceptions from countries such as Saudi Arabia and the UAE.
However, oil executives have expressed a favourable outlook in the near future as US oil production is expected to step up, easing the supply crunch.
S&P Global Platt Analytics’ Rene Santos, manager for North American Supply, expects an exit-to-entry growth of 880,000 b/d and average of 12.05 million b/d in 2022.
Experts have previously predicted that the growth in oil prices has yet to end. Earlier this week, US-based bank Goldman Sachs said that they expected prices to reach $100 by the end of the year.
