Morning Highlights: Oil Edges Higher as U.S. Storm Peaked at 2M BPD Outage; OPEC+ to Extend March Pause

Tuesday, January 27, 2026 | 6:15 AM EST

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MARKET SNAPSHOT

Oil rose modestly as massive U.S. winter storm impacts were tempered by Kazakhstan's supply return. Brent gained $0.23 (0.35%) to $65.82/bbl, while WTI rose $0.29 (0.48%) to $60.92/bbl as of 6:15 AM EST.

Markets are balancing the largest U.S. weather-related production outage in years against normalizing Kazakh supply and persistent fundamental oversupply.

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Winter Storm Peaked at 2 MILLION BPD U.S. Outage

Historic Disruption: U.S. oil producers lost up to 2 million bpd or roughly 15% of national production over the weekend as a severe winter storm swept across the country, straining energy infrastructure and power grids, analysts and traders estimated.

Timeline & Recovery:

• Saturday peak: 2 million bpd shut-ins, Energy Aspects estimated

• Permian Basin: Likely experienced the largest share at around 1.5 million bpd at peak

• Monday: Production losses eased, with Permian shut-ins estimated at about 700,000 bpd

• Expected full restoration: January 30

This is a massive revision from Monday's JPMorgan estimate of 250,000 bpd. The 2 million bpd peak represents one of the largest weather-related U.S. production disruptions on record. However, the rapid recovery (2M to 700K in two days, full restoration by Thursday) suggests the impact, while dramatic, is very temporary.

Gulf Coast Refinery Issues: Several refineries along the U.S. Gulf Coast reported issues related to freezing weather, raising concerns about fuel supply disruption, ANZ's Daniel Hynes said.

Refinery disruptions could temporarily tighten product markets even as crude supply normalizes, creating a disconnect between crude and product prices.

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KAZAKHSTAN: TEPID RETURN OFFSETS U.S. SUPPORT

Production Resuming Slowly: Kazakhstan is poised to resume production from its biggest oilfield (Tengiz), according to its energy ministry, though industry sources said volume was still low.

CPC at Full Capacity: The CPC confirmed it returned to full loading capacity at its Russian Black Sea terminal after completing maintenance at one of three mooring points.

Yesterday we reported Tengiz was beginning "gradual resumption" - today's language suggests the ramp is slower than hoped. However, with CPC at full capacity, the export bottleneck is eliminated once Tengiz returns to normal rates (up to 840,000 bpd).

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GEOPOLITICAL UPDATES

U.S. Carrier Strike Group Arrives in Middle East: A U.S. aircraft carrier and supporting warships have arrived in the Middle East, two U.S. officials told Reuters Monday, expanding Trump's capabilities to defend U.S. forces or potentially take military action against Iran.

"Supply risks haven't totally evaporated... Tension in the Middle East persists after President Trump dispatched naval assets to the region," Hynes said.

The carrier group's arrival moves from threat to actual forward deployment, raising the stakes. However, we've tracked this pattern repeatedly: deployment → rhetoric → de-escalation. Markets are increasingly skeptical of sustained Iran premium.

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OPEC+ TO EXTEND MARCH OUTPUT PAUSE

Key Meeting February 1: Eight OPEC+ members are set to keep the group's pause on oil output increases for March at their meeting, three OPEC+ delegates told Reuters.

Members Meeting: Saudi Arabia, Russia, UAE, Kazakhstan, Kuwait, Iraq, Algeria, and Oman.

Major Development: This confirms OPEC+ recognizes the oversupply problem and is maintaining production discipline, at least through March. However, Goldman Sachs doesn't expect meaningful OPEC cuts unless prices fall to low $50s, suggesting the group is in "pause and wait" mode rather than actively supporting prices.

Market Impact: The March pause extension is mildly bullish as it prevents additional barrels from hitting an already oversupplied market. However, it doesn't remove existing surplus - it just stops it from getting worse. The IEA's 3.69 million bpd surplus forecast assumes some level of OPEC+ restraint.

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BALANCING ACT: WEATHER DISRUPTION VS. FUNDAMENTAL REALITY

Immediate Bullish Factors:

• 2 million bpd U.S. peak outage (now 700K, full recovery Thursday)

• Gulf Coast refinery disruptions

• U.S. carrier strike group in Middle East

• OPEC+ extending March output pause

Persistent Bearish Factors:

• IEA's 3.69 million bpd 2026 surplus

• Tengiz returning (up to 840K bpd)

• CPC at full capacity

• Venezuelan barrels flowing (Valero, Phillips 66 deals)

• Indian Oil Corp's 7M barrel pivot from Russia

• U.S. crude inventory builds (3.6M barrels last week)

• Potential Russian sanction relief from Ukraine peace deal

The 2 million bpd U.S. outage, while historic, is measured in days (full recovery Thursday). Tengiz's 840,000 bpd return is measured in months. Venezuelan supply additions are ongoing. The IEA's 3.69 million bpd surplus is annual. Temporary disruptions, no matter how large, don't change the fundamental trajectory.

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BOTTOM LINE

Oil is holding gains but struggling to extend the rally despite the largest U.S. weather-related production outage in years. The 2 million bpd peak Saturday (revised dramatically from Monday's 250K estimate) represents genuine, massive supply disruption, but the rapid recovery to 700K bpd Monday and expected full restoration Thursday demonstrates the temporary nature. Gulf Coast refinery issues could create near-term product tightness even as crude normalizes. OPEC+'s February 1 decision to extend the March output pause is mildly supportive, confirming the group recognizes oversupply risks, though it's maintaining discipline rather than actively cutting. The U.S. carrier strike group arrival in the Middle East raises Iran war risk from threat to actual forward deployment. However, markets have grown skeptical of sustained premiums without actual supply disruption. Brent at $65.82 and WTI at $60.92 represent the upper-middle of expected ranges, with Brent approaching Phillip Nova's $67 ceiling. The fundamental reality remains overwhelming: IEA's 3.69 million bpd surplus, Goldman's path to $54 Q4, Venezuelan barrels flowing, Tengiz returning 840K bpd, potential Russian sanction relief. Once Thursday arrives and U.S. production fully restores, the weather support disappears. Tengiz gradually ramping and CPC at full capacity add bearish pressure. The OPEC+ pause is defensive, not bullish - they're trying to prevent the surplus from widening, not eliminate it. This rally feels increasingly like a weather-driven spike that will fade as production normalizes. Without genuine sustained supply disruption (Iran actually disrupting flows, not just rhetoric) or demand improvement, the path follows Goldman toward the mid-$50s. Enjoy the rally while it lasts, but the underlying trend remains lower.