Tag Archives: crude production

Oil extends losses as Texas prepares to ramp up output after freeze

By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather and power outages.

Brent crude futures were down 66 cents, or 1%, at $63.27 a barrel by 12:27 p.m. (1727 GMT). U.S. West Texas Intermediate (WTI) crude fell 99 cents, or 1.6%, to $59.53.

For the week, Brent was on track for a 1.3% gain while WTI was largely flat.

This week, both benchmarks had climbed to the highest in more than a year.

“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.

“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.

Oil prices fell despite a surprise drop in U.S. crude stockpiles last week, before the big freeze hit. Inventories fell 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday.

“Vaccines and the impressive rollouts we’ve seen have delivered strong gains, as have the efforts of OPEC+ – Saudi Arabia, in particular – and the big freeze in Texas, which gave oil prices one final kick this week,” Craig Erlam, senior market analyst at OANDA said.

“With so many bullish factors now priced in, it seems we’re seeing some of these positions being unwound.”

The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.

(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Marguerita Choy and David Gregorio)

Texas energy sector struggles to thaw after deep freeze

By Arpan Varghese

(Reuters) – A deep freeze kept the Texas energy sector in the dark for a fifth day on Wednesday, with Houston’s major shipping channel closed overnight and at least a fifth of U.S. refining output offline.

About 500,000 to 1.2 million bpd of crude production has also been shut, including in the Permian, the largest U.S. oilfield, and it could be weeks before it is fully restored, industry analysts said.

The cold snap, which has killed 21 people and knocked out power to millions of people in Texas is not expected to let up until this weekend.

Electricity prices in Texas continued to surge, as utilities scrambled to meet heating demand. Next-day power for Wednesday at the ERCOT North hub, which includes the cities of Dallas and Fort Worth, spiked to a record of $8,800 per MWh, a nearly six-fold jump from $1,490 on Tuesday.

Texas produces more oil and natural gas than any other U.S. state, and its operators, unlike those in North Dakota or Alaska, are not used to dealing with frigid temperatures.

“A production rebound could potentially take more than a week or two for the majority of oil and gas wells, but it might take longer for production from nearly all wells to recover,” analysts at Citigroup wrote.

The Houston Ship Channel, which had opened for some vessel traffic during Tuesday, was shut again overnight. The 53-mile (85 km) waterway crucial to oil and fuel exports, has been closed since Feb. 14.

“We have 4 delayed incoming vessels, which is not much. The shipping channel is not operating at night time due to weather hazards and we are planning to open the channel in another 3 hours from now. Last night we had one order cancellation due to the weather,” a Houston Pilots dispatcher said.

The supply disruptions drove further gains in oil prices on Wednesday, although U.S. natural gas prices eased after rising more than 10% on Tuesday.

The state’s power grid operator, the Electric Reliability Council of Texas (ERCOT), which had instituted rolling blackouts as demand overwhelmed generation, on Wednesday said it had directed utilities to restore power to 600,000 households last night, with 2.7 million still experiencing an outage.

Nearly 4 million barrels per day of refining capacity has been knocked out, Reuters calculations found.

Cold weather primarily impacts instrumentation that monitors and operates refinery units.

The cold has shut natural gas production and pipelines, which refineries use in power generation. Widespread power outages or instability of external power supply can force shutdowns.

Apart from the refinery shutdowns in Texas, including the nation’s largest, Motiva’s 600,000 bpd Port Arthur facility, Citgo Petroleum Corp said it was continuing to run its 418,000 barrel-per-day Lake Charles plant in Louisiana at reduced rates.

Citgo said it was also finalizing “start-up plans” subject to re-establishing third party services, at its 167,500 barrel-per-day bpd Corpus Christi, Texas refinery.

(Reporting by Arpan Varghese and Diptendu Lahiri in Bengaluru; Editing by Barbara Lewis)

Oil rises as Libya declares force majeure in oilfields

By Bozorgmehr Sharafedin

LONDON (Reuters) – Oil prices rose to their highest in more than week on Monday after two large crude production bases in Libya began shutting down amid a military blockade, risking reducing crude flows from the OPEC member to a trickle.

Brent crude <LCOc1> was up 59 cents, or 0.9%, at $65.44 by 1442 GMT, having earlier touched $66 a barrel, its highest since Jan. 9.

West Texas Intermediate <CLc1> was up 39 cents, or 0.7%, at $58.93 a barrel, after rising to $59.73, the highest since Jan. 10.

Two major oilfields in southwest Libya began shutting down on Sunday after forces loyal to Khalifa Haftar closed a pipeline, potentially cutting national output to a fraction of its normal level, the National Oil Corporation (NOC) said.

NOC declared force majeure on crude loadings from the Sharara and El Feel oilfields, according to a document seen by Reuters.

The closure, which follows a blockade of major eastern oil ports, risked taking almost all the country’s oil output offline.

However, the earlier rise in oil prices eased after some analysts and traders said supply disruptions in Libya will be short-lived and could be offset by other producers, limiting the impact on global markets.

“The oil market remains well supplied with ample stocks and a healthy spare capacity cushion. In other words, the bullish price impact may prove to be fleeting,” said Stephen Brennock of oil broker PVM.

Amrita Sen, chief oil analyst at Energy Aspects, added: “We expect the current scale of outages to be fairly short-lived… as there is limited upside for Haftar to slow the country’s oil revenues to a trickle.”

“The current closures are clearly a power play aimed at boosting Haftar’s leverage amid international efforts to broker peace in the country.”

Foreign powers agreed at a summit in Berlin on Sunday to shore up a shaky truce in Libya, which has been in turmoil since the fall of Muammar Gaddafi in 2011.

If Libyan exports are halted for any sustained period, storage tanks will fill within days and production will slow to 72,000 barrels per day (bpd), an NOC spokesman said. Libya has been producing around 1.2 million bpd recently.

“A prolonged disruption from Libya would be enough to swing the global oil market from surplus to deficit in (the first quarter of 2020),” said ING analyst Warren Patterson.

Meanwhile in Iraq, another major oil producer, two police officers and two protesters were killed as anti-government unrest resumed after a lull of several weeks.

However, production in southern oilfields was unaffected by the unrest, officials said.

Market activity was thin on Monday on the Martin Luther King Jr. holiday in the United States.

(Reporting by Bozorgmehr Sharafedin in London, Additioanl reporting by Aaron Sheldrick in Tokyo; Editing by Kirsten Donovan, Louise Heavens and Jan Harvey)