Oil Prices Settle Lower Amid Winter Storm Production Disruptions
Global oil prices experienced a slight decline on Monday as market participants carefully evaluated the impact of severe winter storms on crude production in key United States regions. This downward movement followed a significant rally in the previous trading session, highlighting the market's ongoing volatility amid multiple influencing factors.
Price Movements and Weekly Performance
Brent crude futures closed down 29 cents, representing a 0.4% decrease, settling at $65.59 per barrel. Meanwhile, U.S. West Texas Intermediate crude declined by 44 cents, or 0.7%, ending the session at $60.63 per barrel. Despite these modest losses, both benchmarks recorded substantial weekly gains of 2.7%, closing on Friday at their highest levels since January 14.
Winter Storm Impact on US Production
The severe winter weather sweeping across the United States created significant disruptions to energy infrastructure and power grids. According to industry analysts and traders, U.S. oil producers experienced substantial losses over the weekend, with production declining by up to 2 million barrels per day. This figure represents approximately 15% of the nation's total crude output.
Consultancy Energy Aspects estimated that production outages peaked on Saturday, with the Permian Basin likely experiencing the largest share of these disruptions at around 1.5 million barrels per day. While production losses eased on Monday, with Permian shut-ins estimated at approximately 700,000 barrels per day, full restoration is expected by January 30.
Regulatory filings over the weekend revealed around two dozen reports of upsets at natural gas processing plants and compressor stations in Texas. However, this number pales in comparison to the more than 200 reported upsets during the initial five days of a severe winter storm in 2021, according to TACenergy analysts.
Geopolitical Tensions and Market Sentiment
Traders remained cautious about geopolitical risks, particularly the ongoing tensions between the United States and Iran. Recent statements from both nations have kept investors on edge, contributing to market uncertainty.
U.S. President Donald Trump recently stated that the United States has an "armada" heading toward Iran while expressing hope that military action would not be necessary. These comments renewed warnings to Tehran regarding protests and nuclear program activities. In response, a senior Iranian official declared that Iran would treat any attack "as an all-out war against us."
Dennis Kissler, senior vice president of trading at BOK Financial, noted that "crude remains in a holding type trade pattern until more is known about how the Trump Administration will handle Iran." He added that ongoing Ukraine-Russian-U.S. peace talks and OPEC's stated intention to maintain current production levels remain significant pressure points for oil prices.
Global Production Developments
In other production news, Kazakhstan announced plans to resume operations at its largest oilfield. However, industry sources indicated that production volumes remain low, and a force majeure on CPC Blend exports continues to be in effect. The Caspian Pipeline Consortium, which operates Kazakhstan's primary exporting pipeline, reported that its Black Sea terminal had returned to full loading capacity following maintenance completion at one of its three mooring points.
OPEC Outlook and Market Forecasts
According to three OPEC delegates, the organization is expected to maintain its pause on oil output increases for March during its upcoming meeting on Sunday. This decision aligns with OPEC's current strategy of managing supply to support price stability.
Looking further ahead, Rystad Energy CEO Jarand Rystad projected that U.S. shale production could decline by as much as 400,000 barrels per day in 2026 if OPEC countries attempt to increase market share and oil prices fall to approximately $40 per barrel.
The oil market continues to navigate a complex landscape of weather-related disruptions, geopolitical uncertainties, and production decisions from major global players. Traders will closely monitor these developments as they assess future price directions and market stability.
