Oil holds close to 13-month high, supported by sharp drop in US output

LONDON: Oil prices remained close to 13-month highs on Thursday, with profit-taking limited by an assurance that US interest rates will stay low and a sharp drop in US crude output last week due to the storm in Texas.

Brent crude for April hit $67.70 a barrel during the session, its highest since Jan. 8, 2020. By 1437 GMT, it had slipped 48 cents, or 0.7%, on the day to $66.56.

US West Texas Intermediate was down 49 cents or 0.8% at $62.73, after also hitting a 13-month high of $63.79.

Tamas Varga, analyst at PVM Oil Associates, said the dip was partly due to profit taking after a three-day rally.

An assurance from the US Federal Reserve that interest rates would stay low for a while weakened the US dollar, while boosting investors' risk appetite and global equity markets.

The winter storm in Texas caused US crude production to drop by more than 10% or 1 million barrels per day (bpd) last week, the Energy Information Administration said.

Fuel supplies in the world's largest oil consumer could also tightened as its refinery crude inputs had dropped to the lowest since September 2008, EIA's data showed.

ING analysts said US crude stocks could rise in weeks ahead as production has recovered fairly quickly while refinery capacity is expected to take longer to return to normal.

Barclays, which raised its oil price forecasts on Thursday, said it oil could rally again on the weaker-than-expected supply response by US oil operators to higher prices.

"However, we remain cautious over the near term on easing OPEC+ support, risks from more transmissible COVID-19 variants and elevated positioning," Barclays said.

The Organization of the Petroleum Exporting Countries and allies including Russia, a group known as OPEC+, are due to meet on March 4.

The group will discuss a modest easing of oil supply curbs from April given a recovery in prices, OPEC+ sources said, although some suggest holding steady for now given the risk of new setbacks in the battle against the pandemic.

Extra voluntary cuts by Saudi Arabia in February and March have tightened global supplies and supported prices.