WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange rallied and the Brent contract on the Intercontinental Exchange held higher in afternoon trade Tuesday, with West Texas Intermediate settling above $60 barrel (bbl). There are forecasts of yet another winter storm hitting parts of central Texas later Tuesday evening, with below-freezing temperatures expected across the nation's key energy-producing state until at least Friday, crippling energy infrastructure amid closed refineries and shut-in oil fields.
At settlement, NYMEX WTI for March delivery futures added 58 cents to settle at $60.05 bbl, while the Brent April contract on the Intercontinental Exchange finished little changed at $63.35 bbl after trading in the red for most of the session. Both crude benchmarks added over 12% in value since the beginning of February. NYMEX March ULSD futures advanced 4.30 cents to finish at $1.8144 gallon and March RBOB futures spiked 8.04 cents or nearly 5% to a fresh 13-month spot high settlement of $1.7729 gallon.
Volatility index for all oil contracts spiked this week amid the deep-freeze weather conditions which originated over the Arctic circle and slammed Texas's energy infrastructure and electricity grid, leaving millions of households and businesses without power, while closing highways. Mobility data released Tuesday showed traffic activity in Texas plunged nearly 50% over the weekend, curtailing demand in the nation's largest state for gasoline consumption. Texas Governor Greg Abbott announced Tuesday the deployment of the National Guard to conduct welfare checks and to assist local authorities in transitioning Texans in need to one of the state's 135 local warming centers.
What's more, parts of central Texas, including Dallas and Fort Worth, are preparing for yet another winter storm Tuesday night with more snow and sleet expected through Wednesday. DTN Ag Weather projects well below normal temperatures through the end of the week in the central United States, adding, "It will likely take until Friday or Saturday until Oklahoma and Texas see widespread above freezing high temperatures."
Many miles of pipeline capacity in Texas run aboveground and equipment is largely unwinterized to withstand subfreezing temperatures, raising the risk of long-lasting damages to the state's critical energy infrastructure. Preliminary figures indicate some 4 million barrels per day (bpd) of refining capacity and 1.2 million bpd of oil production has been taken offline as of Tuesday afternoon.
Refineries and pipelines up and down the Gulf Coast had to shut down operations on Sunday as temperatures fell below freezing, disrupting waterborne shipments from the Gulf's critical exporting hub.
Among those refineries that have halted operations are the nation's largest 630,000 bpd plant at Port Arthur, Texas, operated by Saudi Aramco's Motiva Enterprises LLC; Marathon Petroleum Corp.'s Galveston Bay plant south of Houston with 585,000 bpd of throughput capacity; and Exxon Mobil's 584,000 bpd Baytown refinery near Houston, among others.
Further disrupting the global oil market, a massive earthquake in northeastern Japan this weekend knocked offline about 20% of the country's refining capacity. As much as 743,000 bpd of oil-processing capacity has been idled in the world's fourth-biggest oil importer. With massive supply shocks in the key global markets, oil prices are heading for another week of wild swings.
Liubov Georges can be reached at email@example.com