Oil and Gas News for Tuesday, 3 February 2026: Extreme Storms, Easing Sanctions, and Oil and Gas Market Balances
The global fuel and energy sector is facing serious challenges due to extreme winter conditions and ongoing geopolitical tensions. Investors and market participants are closely monitoring the situation, assessing the impact of weather disruptions, sanctions policies, and the transition to renewable energy on the oil and gas industry and electricity generation.
- An extreme winter storm in the US temporarily halted up to 15% of oil production and significantly reduced gas output; production recovery is underway.
- Oil prices (Brent ~ $65/barrel) remain stable; OPEC+ signals continuity in current production limits.
- The escalation of the US-Iran conflict poses a threat to supply disruptions, despite ongoing peace negotiations regarding Ukraine.
- Natural gas prices in North America and Europe surged amid freezing temperatures; gas reserves in the EU dropped to their lowest levels in recent years.
- Economic recovery in Asia, particularly in China, supports global demand for energy resources, increasing competition for oil and LNG.
- Renewable energy sources achieved a record share in Europe’s electricity generation; however, weak infrastructure and harsh winter conditions highlighted the need for backup capacity.
- The US is easing sanctions on Venezuela following a change of power, paving the way for increased exports of heavy oil to the global market.
Oil: Recovery from the Storm and Price Stability
In the US, a powerful winter storm led to a temporary shutdown of production by up to 2 million barrels per day (approximately 15% of the national total). The main impact was felt in the Permian Basin, but production began to recover within a few days. After a spike at the start of the week, oil prices stabilised: Brent is holding around $65 per barrel, while WTI is around $60. Despite brief disruptions, both benchmark grades have maintained a weekly gain of about 2–3%.
Extreme cold has also affected refining activities. Several major US refineries scaled back operations due to equipment freezing, triggering a surge in refined product prices—particularly diesel fuel and heating oil. However, a severe fuel shortage was avoided thanks to existing stockpiles and the prompt resumption of operations as temperatures rose.
Meanwhile, global oil supply is returning to previous levels. In Kazakhstan, production at one of the largest fields resumed following repairs to an export pipeline, increasing Caspian oil supplies. OPEC+ countries ahead of their upcoming meeting reaffirm their commitment to current quotas and do not plan to increase production in March. Thus, despite natural disruptions, the global oil market remains relatively balanced.
Geopolitical Risks: Iran, Sanctions, and Negotiations
Geopolitical tensions are contributing to uncertainty in the energy market. The conflict between the US and Iran has escalated: President Donald Trump announced the deployment of a carrier "armada" to Iran's shores and threatened action in response to the suppression of protests and Tehran's nuclear ambitions. Iran, for its part, has vowed to consider any attack as "total war." Such rhetoric adds a risk premium to oil prices, as traders fear supply disruptions from the Middle East.
At the same time, cautious optimism surrounds ongoing negotiations between Russia, Ukraine, and the US. If successful, this dialogue could lead to a gradual easing of Western sanctions against the Russian oil and gas sector, altering the configuration of global energy flows. For now, however, the sanctions regime remains strict: the export of Russian oil and gas is confined by price caps and is primarily redirected to Asia. Investors continue to assess geopolitical risks, focussing on both Middle Eastern events and potential shifts in sanctions policy.
Natural Gas: Freezing Temperatures and Price Surge
The natural gas market has been hit hard by extreme cold. In the US, widespread well freeze-offs caused by the winter storm led to a temporary halt of up to 16% of gas production—more than during the 2021 crisis. Daily gas output plummeted from approximately 110 to 97 billion cubic feet (from 3.1 to 2.7 billion cubic metres), triggering a sharp rise in prices. Henry Hub futures more than doubled, exceeding $6 per million British thermal units (MMBtu), around $210 per thousand cubic metres. As temperatures began to ease, prices retreated; however, the situation remains extremely volatile and heavily weather-dependent.
Europe also faced a gas supply deficit. By mid-winter, European storage levels dropped below 50% capacity (a minimum over recent years), as prolonged cold weather sharply increased gas withdrawals. Spot prices in the EU surged to approximately $14 per MMBtu (around $500 per thousand cubic metres), a multi-month high. Supply factors played a significant role: US LNG exports temporarily decreased by almost half due to issues at export terminals, limiting gas inflows to Europe and driving prices upward. Some LNG cargoes were redirected to the US domestic market for higher returns, exacerbating the situation in the global market.
In the coming weeks, gas price dynamics in Europe will largely depend on weather conditions. If February proves relatively mild, the market will receive a reprieve; however, by the end of winter, gas reserves will still likely remain significantly below normal levels. Governments and companies in the EU will need to actively replenish depleted storage facilities during the inter-season, competing for LNG in the global market. Analysts caution that a new wave of cold weather or supply delays could trigger another price spike, as the global gas market has become more interconnected and sensitive to local disruptions.
Electricity and Coal: Networks Under Strain
Energy systems in the Northern Hemisphere are operating under increased strain. In the US, the operator of the largest eastern power grid (PJM) declared a state of emergency: daily consumption peaks exceeded 140 GW, heightening the risk of rolling blackouts. To maintain balance, authorities had to deploy backup diesel generators and oil-fired power plants until the end of January. This helped avoid a blackout but necessitated increased burning of oil and coal instead of natural gas. Amid arctic cold, generation from wind and solar plants dropped sharply, necessitating the maximum utilisation of traditional hydrocarbon capacities to satisfy demand.
In Europe, a similar scenario has unfolded: electricity demand surged, and several countries temporarily brought coal-fired power plants back online to handle peaks. Although by the end of 2025 coal's share in the EU's electricity generation declined to a record 9.2%, its local usage has increased this winter. At the same time, infrastructure limitations have emerged: inadequate transmission capacity has forced restrictions on wind generation output during peak production periods, leading to lost cheap energy opportunities and increased prices at other times. Experts are calling for expedited upgrades to electricity grids and the adoption of energy storage systems to enhance energy systems' resilience and reduce reliance on coal in emergencies.
Growth of Renewables and Energy Transition
The transition to clean energy continues to accelerate. In 2025, EU countries generated more electricity from wind and solar (30% of total generation) than from all fossil sources combined (29%). Overall, low-carbon sources (renewables and nuclear generation) accounted for 71% of the EU's electricity production. Record outcomes were aided by the introduction of new capacities, with the total installed capacity of solar parks increasing by 19% year-on-year. In several countries (Spain, the Netherlands, Hungary, among others), solar energy now covers over a fifth of national consumption.
Despite these successes, Europe has faced high energy prices and infrastructure bottlenecks. Price rises in 2025 coincided with peaks in the use of gas-fired power stations and the forced shutdown of several wind farms due to grid overload. To diminish prices and ensure stable integration of renewable sources, investments are needed in expanding electricity grids and energy storage systems. Politically, some governments (such as Germany and the Czech Republic) have achieved easing of certain EU climate measures while Brussels simultaneously negotiated a deal with Washington for purchasing additional volumes of American energy resources. This has sparked discussions about the balance between environmental objectives and energy security.
The trend of clean energy development is also strengthening globally. In 2025, China and India introduced record capacities of solar and wind power plants, allowing these countries to slightly reduce carbon emissions in electricity generation for the first time in over half a century, despite overall consumption growth. In 2026, further inflows of investment into "green" projects are expected worldwide. Nevertheless, the recent crisis has underscored that oil, gas, and coal remain indispensable for meeting peak demand and emergency situations. In the coming years, countries will face the challenge of combining accelerated renewable energy development with maintaining sufficient backup capacities based on fossil fuels.
Venezuela: A Return to the Oil Market
A significant development has been the easing of the sanctions regime against Venezuela. In January, following a change of power in Caracas, Washington announced plans to lift some restrictions from 2019 to increase oil supply in the global market. A general licence is expected to be issued, allowing foreign companies to expand operations in Venezuela's oil and gas sector. Recipients will include partners of the state-owned PDVSA—Chevron, Repsol, Eni, Reliance, and others—who have already submitted applications to ramp up production and exports.
Experts predict that Venezuela’s oil exports will begin to grow rapidly. By the end of 2025, sanctions had reduced exports to 500,000 barrels/day (down from 950,000 barrels/day in November), but in 2026 they could exceed 1 million barrels per day. The US has already agreed with Caracas on the first deal worth $2 billion to replenish its strategic reserve and is discussing an investment plan of approximately $100 billion to restore Venezuela’s oil industry—from fields to refineries and power grids.
The first tankers carrying Venezuelan oil have already arrived in US ports under special licenses, allowing PDVSA to partially relieve its storage facilities. Refineries on the American Gulf Coast, designed for heavy Venezuelan crude, are preparing to resume processing this feedstock. Additional volumes from Venezuela are expected to adjust balances in the OPEC+ market; however, production recovery is anticipated to take time due to the country’s aging infrastructure.
Market Expectations and Conclusions
Despite all the upheavals, the global energy market enters February 2026 without signs of panic, albeit in a heightened state of readiness. Short-term factors—weather and politics—continue to support price volatility for oil and gas, but the systemic balance of supply and demand has yet to be disrupted. OPEC+ is preventing the oil market from slipping into deficit, and the swift recovery of production and international supplies is smoothing local disruptions. Strong demand in Asia (particularly in China and India) is also helping to maintain balance in the market. Unless new extraordinary events unfold, oil prices are likely to remain near current levels (around $60–65 per barrel for Brent) until the next OPEC+ summit.
In the gas market, much will depend on the weather: a mild end to winter will allow for further price reductions, whereas a new cold front could once again spur prices upward. Europe needs to replenish depleted gas reserves ahead of next winter. Competition with Asia for LNG is expected to continue being a factor of high price pressures. Investors are also watching political developments: any changes regarding Iran and Venezuela or breakthroughs in the war in Ukraine could significantly shift market sentiments.
In the long term, the energy transition remains a priority; however, recent events have highlighted the critical importance of reliable traditional capacities. Companies and governments are compelled to seek a balance between investing in renewable energy and ensuring adequate fossil fuel reserves. In 2026, achieving this balance will become a key challenge—maintaining energy security while simultaneously advancing climate objectives.
