Global crude oil prices have reduced by almost 2% in early trade amid concerns over the temporary closure of the refineries in the US South following a harsh drop in temperatures, which would take some time to resume operations.
Brent crude futures slipped by $1.07 or 1.7% to reach $62.86 a barrel following a 0.6% decline on 18 February while the US West Texas Intermediate (WTI) crude futures dropped by $1.21 or 2% to settle at $59.31 a barrel, reported Reuters.
According to analysts, the extreme cold has shut an estimated one-third of crude production in the US but concerns are raised over the impact on the refiners.
ANZ Research was cited by the news agency as saying in a note: “The market is concerned about the refinery outages in Texas, where Arctic weather has caused power outages and frozen wells and pipes.”
Despite the closure of around 3.5 million barrels per day (Mbpd) of oil output in the US, the reduced demand from refineries would result in increased crude stocks in the coming weeks, ANZ said.
In a note, Citi analysts said that some US refineries would undergo maintenance work, which is normally scheduled for the spring, prior to the summer driving season.
They said: “Refinery outages could be deeper and longer-lasting, especially ahead of the spring maintenance season, as some plants could decide to anticipate planned turnarounds of roughly 500,000bpd on aggregate over the next month.”
The Energy Information Administration reported that the US crude stockpiles, before the freeze, dropped more than expected in the week to 12 February while the inventories reduced to 461.8 million barrels by 7.3 million barrels representing their lowest since March 2020.