Oil Prices Surge 🛢
Oil Prices Surge
On Wednesdays Crunch, we talked about a brutal winter storm in America that led to a sudden increase in energy demand. In Texas, more than 3 million people were without power as demand surged in the extreme cold. Texans need power to generate heat in their homes, but sadly, there was not enough power to go around. The state even told its residents to boil their water or stop using water entirely as the state battled with burst water pipes, power outages, and broken water mains. Oil refineries in The Lone Star State were forced to shut down due to the shortage of energy, and they had cut back on production. Now, the global oil markets are feeling the aftermath.
According to Bloomberg, nearly 40% of America’s oil production is currently offline as oil refineries cut back on production. Amid the sudden supply shock, oil prices reached 13-month highs as investors bought energy futures, causing a rally in both the U.S. and European oil markets.
Oil production will continue to decline as the power outages in Texas last. Analysts aren’t sure how long the outages will last, but estimates have gotten progressively longer, with some estimating it will take weeks before things return to normal. Continued outages mean a continued lack of production and Citigroup said it anticipates a loss of 16 million barrels through early March.
It will be interesting to see if oil prices continue this bullish trend as the country deals with the supply shock.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.