Crude oil gains as US production slowly returns after Texas freeze
TOKYO — Oil prices rose on Monday as the slow return of US crude output that was cut by frigid conditions raised concerns about supply just as demand is coming back from the depths of the coronavirus pandemic.
Brent crude was up 76 cents or 1.2% at $62.91 a barrel by 0104 GMT, after gaining nearly 1% last week. US oil rose 74 cents or 1.3% to $59.24 a barrel having fallen 0.4% last week.
Abnormally cold weather in Texas and the Plains states forced the shut down of up to four million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.
Oilfield crews will likely take several days to de-ice valves, restart systems and begin oil and gas output. US Gulf Coast refiners are assessing damage to facilities and may take up to three weeks to restore most of their operations, analysts said, with low water pressure, gas and power losses hampering restarts.
“With three quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.
“Longer term, the fall in capital expenditure at US shale oil companies this year will keep drilling activity subdued, leading to output remaining below prepandemic levels,” ANZ said.
For the first time since November, US drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy producing centers.
OPEC and US oil companies see a limited rebound in shale oil supply this year as top US producers freeze output despite rising prices, a decision that would help OPEC and its allies.
OPEC (Organization of the Petroleum Exporting Countries), this month, cut its 2021 forecast for US tight crude, another term for shale, and expects production to decline by 140,000 barrels per day to 7.16 million bpd. The US government expects shale output in March to fall about 78,000 bpd to 7.5 million bpd.
The OPEC forecast preceded the freezing weather in Texas, home to 40% of US output, that has shut wells and curbed demand by regional oil refineries. The lack of a shale rebound could make it easier for OPEC and its allies to manage the market.