Oil prices rise over $1 as US output makes slow restart after Texas freeze

Oil prices jumped by more than $1 on Tuesday, as US output was slow to return after a deep freeze in Texas shut in crude production last week.

Shale oil producers in the southern US could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output that shut down because of cold weather, as frozen pipes and power supply interruptions slow their recovery, sources said.

Brent crude was up $1.06, or 1.6 per cent, at $65.30 a barrel by 0204 GMT, after earlier hitting a high of $66.38. US crude rose 81 cents, or 1.4 per cent, to $62.51 a barrel, after hitting a session high of $62.73. Both benchmarks have risen more than 1 per cent after climbing nearly 4 per cent in the previous session.

"The positive momentum continues in the oil complex, with investors unabashedly predisposed to a bullish view," said Stephen Innes, chief global markets strategist at Axi in a note.

Goldman Sachs Commodities Research raised its Brent crude oil price forecasts by $10 for the second and third quarters of 2021, citing lower expected inventories, higher marginal costs to restart upstream activity and speculative inflows.

The Wall Street bank expects Brent prices to reach $70 per barrel in the second quarter from the $60 it predicted previously and $75 in the third quarter from $65 earlier.

Morgan Stanley expects Brent crude prices to climb to $70 per barrel in the third quarter on "signs of a much improved market" including prospects of a pick-up in demand.

"It is hard not to be bullish with oil prices now that the deep freeze disruption practically guarantees the summer pickup in crude demand will erase whatever supply glut is left," said Edward Moya, senior market analyst at OANDA in New York.

"The global oil demand is looking a lot better now that the Pfizer vaccine shows positive results after one dose, the UK sees the end of the pandemic 'in sight', and as hospitalisations and deaths continue to decline after peaking in early January."

Stockpiles of US crude oil and refined products likely declined last week, a preliminary Reuters poll showed on Monday,due to the disruption in Texas.