Oil rose on Wednesday, buoyed by frigid Texas temperatures that curtailed production in the largest U.S. producing state, offset somewhat by reports that Saudi Arabia plans to increase output in the coming months.
Oil has been supported by OPEC+ supply curbs, Saudi Arabia's additional cuts and hopes of a demand rebound due to COVID-19 vaccinations. Historic cold weather in Texas, which supplies the bulk of U.S. crude, has propelled prices higher in recent days.
"This has just sent us to the next level," said Bob Yawger, director of energy futures at Mizuho in New York. "Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%," Yawger said.
The U.S. deep freeze should disrupt production for several days if not weeks, industry experts said, as wellheads have frozen and refineries have been shut.
Brent and WTI rose more than $1 during the session, hitting their highest level since January 2020. Prices pared gains after the Wall Street Journal reported that Saudi Arabia was expected to announce plans to raise output when OPEC and allied oil producers meet next month.
But Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said it was too early to declare victory against the COVID-19 virus and that oil producers must remain "extremely cautious".
"We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious," he told an energy industry event.
The stronger price environment has put more attention on OPEC+, which groups OPEC, Russia and allied producers. It meets to set policy on March 4.
OPEC+ sources told Reuters that the group's producers are likely to ease curbs on supply after April given a recovery in prices.
U.S. oil inventory data from the American Petroleum Institute and the U.S. Energy Information Administration (EIA) will be released on Wednesday and Thursday respectively, a one-day delay for each after this week's U.S. holiday.
Analysts polled by Reuters estimated, on average, that crude stocks fell 2.2 million barrels in the week to Feb. 12.