Oil field workers on a rig in Tioga, North Dakota.
Ken Cedeno | Corbis | Getty Images
U.S. crude oil prices rose more than 1% Wednesday after production fell substantially in the wake of severe winter storms this month.
The West Texas Intermediate futures contract for March was last up 95 cents, or 1.28%, to trade $75.32 a barrel. The Brent futures contract March gained 71 cents, or 0.89%, to trade at $80.26 a barrel.
Production in the U.S. fell by an estimated 1 million barrels per day to 12.3 million bpd total for the week ending Jan. 19, according to the Energy Information Agency. Crude oil inventories in the U.S. dropped by 9.2 million barrels during the same period.
Surging U.S. crude production has weighed on prices for months with estimated output returning to a record of 13.3 million bpd earlier this month. Record production in the U.S. has collided with a weakening economy in China, raising worries that supply is outstripping demand for oil.
China’s central bank on Wednesday pledged to slash the amount of liquidity that the nation’s financial institutions are required to hold in an effort boost economic growth.
“Oil is being supported as China is taking steps to try to shock and awe its beleaguered economy out of a tailspin,” Phil Flynn, an analyst at the Price Futures Group, wrote in a Wednesday note.
“Talk of a big rescue package is making the rounds and steps today by the Chinese government suggest that that could be coming sooner rather than later,” Flynn wrote.
On the supply side, Libya restarted production Sunday at the Sharara oilfield, which has the capacity to produce 300,000 barrels per day. The oilfield was shut down for two weeks due to protests.
And oil output is slowly recovering in North Dakota after winter storms hit production this month in the third-largest crude producing state in the U.S. Output was down 170,000 to 220,000 barrels per day on Wednesday, compared to 700,000 bpd a week ago, according to the state pipeline authority.
Oil prices should remain range bound in the first quarter of 2024 barring a significant escalation in the conflict in the Middle East, according to Vikas Dwivedi, an oil and gas strategist at Macquarie.
Brent should remain in a range of $72 to $82 unless supply is materially affected in the Middle East, Tamas Varga, an analyst with PVM Oil Associates, wrote in a note Wednesday.
Geopolitical risk is largely already factored into prices, according to Dwivedi. “Without current geopolitical tensions, we believe crude would sell off meaningfully,” the analyst said.
WTI is up 4% and Brent is up 3.4% for the year as tensions have risen in the Middle East.
The market is waiting for the Energy Information Agency to release the latest weekly U.S. crude supply data at 10:30 am ET.