Oil Prices Hit 7-Year High as China and Russia Team Up Against U.S.

Crude oil futures continued to rise Friday (Feb. 4), closing at their highest level since September 2014, as severe winter storms in the U.S. heighten concerns about oil supplies.

  • WTI crude futures were up $2.04, or 2.3%, at $92.31 a barrel. This is the highest closing level since Sept. 29, 2014.
  • BRENT crude futures were up $2.16, or 2.4%, at $93.27 a barrel. This is the highest closing level since Oct. 2, 2014.

About 350,000 homes and businesses in states including Tennessee, Arkansas, and Texas were without power Friday due to winter storms that brought rain and snow.

In Texas, temperatures below -7 degrees Celsius are expected in the coming days. This could disrupt oil and gas production in the Permian Basin. The Permian Basin is located in west Texas and extends into southeast New Mexico. Temperatures in the Midland, the economic center of the Permian Basin, are reported to drop to -11 degrees Celsius.

Dan Myers, an analyst with Houston-based energy consulting firm Gelber & Associates stated, “The relative strength of the cold in mid-Texas cannot be understated – consecutive days of freezing temperatures within this week have the potential to lead to additional freeze offs in the Permian.”

In addition, oil markets are also supported by other risk factors that may affect oil supply, such as the Russia-Ukraine crisis and OPEC+ production limits.

OPEC+ is sticking to its original agreement to increase oil production by just 400,000 barrels per day in March. The U.S. and its allies have previously put pressure on OPEC+ to further increase oil production to dampen oil prices, which have reached their highest level in seven years.

The situation in Ukraine has not improved since then. Further, according to mainstream media reports, over a hundred thousand Russian soldiers are on the border with Ukraine. While Russian President Putin makes it clear to the West that no provocations should be made against Russia and that Russia should not be drawn into a war, the U.S. counters with troop deployments to Eastern Europe. President Biden has authorized the deployment of more troops close to Ukraine. The troops are to be stationed in Germany, Poland, and Romania.

Earlier this week, the U.S. and U.K had threatened Russia with economic sanctions if it invaded Ukraine.

In the meantime, Russia and China have further deepened their cooperation. The two countries speak of a friendly cooperation that knows no boundaries. They have also signed a new gas deal that will transport gas from Russia to China over the next 30 years. For this purpose, a new pipeline will be built from the west of Russia to the north of China.

Both countries announced, “Friendship between the two States has no limits, there are no ‘forbidden’ areas of cooperation.”

The cooperation of the two powerful countries shows that both want to oppose the supremacy of the U.S. and reduce its influence on the two countries.

The Spot Market is Closed

Saturday, February 5, 2022

Energy
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91.92

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