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U.S. Oil Prices Surge As Texas Deep Freeze Triggers Record Production Slump

The Energy Department said extreme U.S. weather triggered a record fall in domestic crude oil production last week.

U.S. oil prices jumped to the highest in more than a year Wednesday after Energy Department data showed domestic crude production matched a record decline last week amid the extreme winter storms in Texas and the southwest.

The Energy Information Administration said crude stockpiles for the week ending on February 19 rose by 1.3 million barrels, topping the market consensus of a 463,000 barrel drawdown. Crude production, however, fell by 1.1 million barrels per day over the same weekly period, matching the most on record, as key hubs in Texas and the southwest were taken offline amid the region's extreme weather crisis.

Crude stockpiles on the east coast were also affected, falling to a record low as inventory was shifted to other domestic markets or sold internationally, while distillate stockpiles fell the most since February 2007.   

WTI crude futures for April delivery, the benchmark for U.S. oil and gas prices, were marked 2.66% higher on the session at $63.30 per barrel, a level last seen in early January 2020.

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Brent crude contracts for the same month, meanwhile, which are more tightly-aligned to global prices, rose $1.80 per barrel to $67.17.

ExxonMobil  (XOM)  shares, meanwhile, were marked 3.1% higher at $56.70 each while its larger rival, Chevron Corp.  (CVX)  rose 3% to $102.70 each.

Earlier this week, Goldman Sachs raised its near-term estimates for global crude prices by $10 per barrel amid what it called a "stimulus-driven recovery" and oil's "unmatched ability to hedge against inflation shocks."

"We now forecast Brent prices will reach $70 per barrel in (the second quarter) and $75 per barrel in (the third quarter)," lead analyst Damien Courvalin wrote. "We expect this rally to be driven by both rising long-dated prices as well as a sustained steep level of backwardation."

Backwardation in crude markets takes place when spot prices are higher than futures market prices.