Rising Oil Prices And Texas Suffering Caused By Frost

Rising Oil Prices And Texas Suffering Caused By Frost: According to the point of views of analysts in a survey carried out by an agency yesterday, February 16, 2021, US crude inventories continued declining in the week ending February 12th,
as refining processes were stable while crude oil exports increased.

Commercial inventories of crude oil are expected to decrease by 3.4 million barrels,
and the inventories will be equal to the five-year average at 465.6 million barrels,
according to data from the US Energy Information Administration (EIA).

The release of (EIA) data was postponed to February 18 because of a federal holiday. 

US inventories of crude oil have decreased by 34 million barrels since the week ending December 4,
when inventories were at an 11% surplus from the five-year average,
as refineries have been promoting their processes since mid-October.

Changes In Energy Production For The Week

Drawdowns from crude oil inventories are expected to increase soon,
as the productions of New Mexico and Texas have been affected by sub-zero temperatures.

Oil production was affected by 3 to 4 million barrels per day due to the weather as of February 15th.

The impact of this decline in production will be reflected in next week’s data.

The increase in US crude oil exports could also contribute to reducing inventories.

Kepler’s shipping tracking data shows that 17.09 million barrels of crude oil were exported from the United States last week,
compared to 15.14 million barrels in the previous week.

Analysts had expected a rise in US gasoline inventories in the week ending February 12th
by 2.2 million barrels if the refineries were stable or slightly higher,
while US distillate inventories were expected to have decreased by 2.2 million barrels.  

The frigid temperatures are likely to have promoted the demand for distillates.

And when inventories declined by 2.2 million barrels,
it would guarantee that US inventories would reach 158.9 million barrels,
which would lead to reducing the surplus to an average of one-fifth to reach 5.9%.

Also, gasoline inventories reaching 2.2 million barrels would bring US inventories to 258.9 million barrels,
which is roughly equivalent to the five-year average.

Gasoline inventories in the United States have increased by 31 million barrels since early November,
which is deemed an ideal figure for this time of year. 

Weekly Oil Prices

Crude oil and distillate futures rose on the New York Mercantile Exchange
on Tuesday to the highest price levels since early January 2020,
after cold weather in Texas shut down the largest refineries and shale oil fields,
threatening to cut off fuel supplies to one of the world’s largest energy centers.

At around 9:00 AM ET, WTI for March delivery rose just over $ 60 a barrel,
while Brent crude for April delivery fell to $ 63 a barrel on the Intercontinental Exchange.

With this, both WTI crude and Brent crude have added more than 12% in value since the beginning of February.

Factors That Affected Oil Production This Week

Because of the extremely low temperature of the Arctic, the Texas electrical operator,
Ercot, was forced to impose alternating blackouts on Monday, leading to millions of homes and businesses without electricity.

“Every network operator and every electrical company is fighting to restore power now,” said Bill Magnus, President and CEO of Ercot.

The arrival of the frigid temperatures not only spurred electricity demand but also disrupted oil refineries and producers,
resulting in the closure of many areas of the country’s main energy center.

This extreme vulnerability happens because many of the pipelines in Texas extend over the ground,
and these pipelines are not equipped to withstand this extremely low temperature that has reached freezing.

According to the competent authorities, between 3.3 to 3.8 million barrels per day of refining capacity along the Texas Gulf Coast stopped working owing to the freeze in the middle of Monday.

The disruption in global oil markets increased, as a massive earthquake in northeastern Japan this weekend cut off about 20% of the country’s refining capacity. 743,000 barrels per day of oil processing capacity has been disrupted in the world’s fourth-largest oil importer.

With major supply shocks to critical markets, oil prices are heading to another week of sharp fluctuations.

Oil Companies Are Affected By The Extremely Low Temperatures

Until Tuesday morning, the following refineries had stopped working:

• Motiva Enterprises, affiliated with Saudi Aramco in Port Arthur,
  which is one of the largest companies, with a daily production capacity (630 thousand barrels).
• Galveston Bay Refinery affiliated to Marathon Petroleum South Houston,
  daily production capacity (585 thousand barrels).
• ExxonMobil closed the Baytown refinery near Houston,
  which has a daily production capacity (584 thousand barrels),
  and some units in its refinery in the town of Beaumont as well.
• Total SE reduced crude processing to the lowest level and closed a major refining unit at its Port Arthur plant,
  with a daily production capacity (185,000 barrels).
• The closure of the Permian Basin was also a product of cold weather,
  with oil production reaching nearly 1 million barrels per day, according to Rystad Energy,
  a consulting firm. West Texas Intermediate crude produces about 4.6 million barrels of oil per day. 

This severe supply disruption synchronized with a time when crude oil inventories were shrinking across the country.

A specialized bank estimates that the surplus decrease of energy inventories, whether they were inventories of crude oil,
gasoline, or distillates, in comparison with last year’s, which were from 140 million barrels at the end of June of 2020 to only 36 million barrels.

Meanwhile, measures for fuel demand in the United States rose during the past week ending February 12th,
at 20.2 million barrels per day, the highest weekly rate since the weakening of demand for oil in March of last year.

The International Energy Agency (IEA) expects that global demand for oil will outpace its production in the second half of this year,
leading to a rapid decline in Inventories.