February 17, 2021: Oil prices fell in early trade on Wednesday as the U.S. dollar climbed, retreating after a two-day rally that was driven by an Arctic blast curbing output from oil and gas fields in Texas, the country's biggest oil-producing state.
U.S. West Texas Intermediate (WTI) crude futures gave up 33 cents, or 0.6% to $59.72 a barrel at 0140 GMT, retreating from a 13-month high of A$60.95 hit on Tuesday.
Brent crude futures dropped 40 cents, or 0.6%, to $62.95 a barrel, coming off three days of gains.
“Oil is trading lower via a stronger U.S. dollar which is gaining a head of steam with U.S. (treasury) yields ripping higher,” Axi chief market strategist Stephen Innes said in a note.
A stronger U.S. dollar makes U.S.-dollar-priced crude more costly for buyers holding other currencies.
Brent also dropped after Norway, western Europe's largest oil and gas producer, averted a strike and shutdowns of major offshore fields, as oil workers reached a wage bargain with operator Equinor.
Investors had priced in a strike going ahead, as that has typically happened in the past few years, Rystad Energy analyst Paola Rodriguez-Masiu said.
“Yet the strike was avoided …As a result, with oil supply unaffected, Brent gains had to be reversed to a certain extent,” she said in a note.
Still, U.S. oil supply remains strained amid a deep freeze in the U.S. South which has hit power supply, and in turn knocked out about 500,000 to 1.2 million barrels per day (bpd) of crude production in the Permian Basin in Texas.
Estimates of total curtailed shale oil production range from at least 2 million barrels per day to 3.5 million bpd, analysts said.
At the same time, the historic icy snap has knocked out nearly one-fifth of the country's refining capacity, according to Reuters calculations.
“This is one of the worst Mother Nature catastrophes I can ever remember while catching the oil complex wrong-footed at the supply levels,” Innes said.
U.S. oil inventory data from the American Petroleum Institute industry group and the Energy Information Administration (EIA) will be released on Wednesday and Thursday respectively, delayed following a U.S. holiday on Monday.
Analysts polled by Reuters estimated, on average, that crude stocks fell 2.2 million barrels in the week to Feb. 12.