By Barani Krishnan
Investing.com - The unhinged oil rally had everything going for it, from geopolitics to supply politics. The only thing missing was a real weather crisis — made up this week by the Texas freeze that tipped the market firmly above $90 on fears the Permian shale basin could get frozen again like last year.
U.S. crude and its U.K. peer Brent rallied for a seventh straight week, racing toward Wall Street banks’ call for $100 a barrel. To be sure, that target was made well before the Russia-Ukraine crisis, half-hearted production hikes by OPEC+ and, now, the arctic blast gripping much of America, including Texas — the fourth hottest U.S. state outside of winter.
“Crude prices seem to have a one-way ticket to $100 oil,” Ed Moya, analyst at online trading platform OANDA, wrote in his weekend commentary.
“This week’s rally in crude oil was supported by the OPEC+ decision to stick to their gradual increase strategy and as U.S. production fell again. An arctic blast is also disrupting some production in Texas and that is driving this latest price surge. Everything seems to be turning very bullish for WTI crude and the bullish momentum might not see much resistance until the $95 level.”
New York-traded WTI, or West Texas Intermediate, settled up $2.04, or 2.3%, at $92.31 per barrel, after a session high at $93.17. Week-to-date, the U.S. crude benchmark was up nearly 7% while the cumulative gain for the seven weeks running was 30%. This year alone, WTI has risen some 23%.
London-traded Brent, the global benchmark for oil, settled up $2.16, or 2.4%, at $93.27, after a new eight-year peak at $93.69. Week-to-date, Brent was up about 4% while its cumulative advance over seven weeks was 27%. Year-to-date, Brent has gained 20%.
The rally in oil gained new impetus as the focus fell this week on Texas, where temperatures were forecast to dip below 20 Fahrenheit (-7 Celsius) in many parts in the coming days.
West of Texas is home to the Permian oil and gas basin which spills over into New Mexico’s southeast.
“The relative strength of the cold in mid-Texas cannot be understated - consecutive days of freezing temperatures within this week have the potential to lead to additional freeze offs in the Permian,” said Dan Myers, analyst at Houston-based energy consultancy Gelber & Associates.
Midland, the business heart of the oil- and gas-rich Permian Basin, could fall to 11 Fahrenheit before the end of the week, Bloomberg reports, adding that Houston will likely drop to 28 and Dallas to 18.
The stakes of another super freeze are high in Texas, where last year’s winter storm led to blackouts and deaths of more than 200 people.
As Bloomberg noted, this year’s storm will test whether Texas Governor Greg Abbott and Republican lawmakers have done enough to bolster the power network, including new rules requiring the grid operator to increase reserve capacity and make it easier for industrial users to get paid to reduce consumption.
Texas officials have said that they’re confident that the Lone Star State’s power grid can avoid a repeat of last year’s catastrophic blackouts as a major storm sweeps through the region, although the icy blast could still bring local outages.