High Prices Prompt Drillers to Seek More Crude Oil

U.S. West Texas Intermediate and international benchmark Brent crude oil futures jumped to a multi-year high on Friday, continuing its rally for a seventh week on concerns over potential supply disruptions fueled by freezing temperatures throughout the United States and ongoing geopolitical tensions in Eastern Europe and the Middle East.

On Friday, March WTI crude oil futures settled at $92.31, up $2.04 or +2.26%. The United State Oil Fund ETF (USO) finished at $64.91, up $1.40 or +2.20%.

Essentially, crude oil’s surge was fueled as buyers piled into the market due to expectations that world supplies will continue to remain tight due to low production and rising global demand.

Weather Woes Hurt Production, Boost Prices

WTI and Brent crude oil futures were boosted by a deep freeze in Texas that disrupted some Permian oil production. The freezing weather in the United States, which had spread from the Midwest south to Texas, locked up Permian oil wells, as icy roads prevented some trucking operations crucial for oil production.

Due to the winter weather, a large producer in the Permian had to shut in 4,000 barrels per day (bpd) of its crude production, a source with knowledge of the situation told Bloomberg late on Thursday. The freezing storm has also affected some wells in the largest U.S. shale area.

Supply Worries Increase amid Escalating Eastern European Tensions

Oil prices were also underpinned on Friday by the tension between the United States and Russia over Ukraine.

On Thursday, the U.S. State Department spokesperson Ned Price said that “the United States has information that Russia is planning to stage fabricated attacks by Ukrainian military or intelligence forces as a pretext for a further invasion of Ukraine.”

“Russia has signaled it’s willing to continue diplomatic talks as a means to de-escalate, but actions such as these suggest otherwise,” Price added.

US Drillers Add Oil and Gas Rigs for Fifth Week in a Row – Baker Hughes

U.S. energy firms last week added oil and natural gas rigs for a fifth week in a row for the first time since November as crude prices extended their rally to a seventh week to levels not seen since 2014, prompting drillers to seek more oil, Reuters reported.

The oil and gas rig count, an early indicator of future output, rose three to 613 in the week to February 4, its highest since April 2020, energy services firm Baker Hughes Co said in its closely followed report on Friday.

Baker Hughes said that puts the total rig count up 221, or 56%, over this time last year.

U.S. oil rigs rose two to 497 this week, their highest since April 2020, while gas rigs gained one to 116, their highest since January 2020.