Extreme Cold Affects Refinery Production
February 18, 2021
I forgot about President’s Day on Monday, so API inventory data came out last night and today we get the DOE numbers.
API called crude down 5.8 million with Cushing down 3 million barrels. The estimated for today’s DOE are for crude stocks to have a draw of 2.4 million. Gasoline stock were up 3.9 and today they are looking for a build of 1.4 million. Distillates were down 3.5 million barrels and the estimate for today’s DOE are down 1.6 million.
Citigroup said the cumulative US production loss due to the extreme cold weather could reach 16 million barrels though early March, with more than 2 million bpd of crude output disrupted on Tuesday.
The Wall Street Journal reported that Saudi Arabia plans to increase oil output in the coming months, reversing a recent production cut of 1 million bpd. Saudi Arabia voluntarily cut those 1 million barrels in addition to their quota and can certainly change their mind. They have not communicated any indication to official OPEC, which meets again in March. The current market sentiment is that they will bring these barrels back, it is just a matter of time. Will it be in March of maybe not until April. There are many reports that all stress the return of strong demand in the back half of this year and all oil producers and especially Saudi Arabia are trying to navigate when demand will hit, and when they might be able to increase production to keep supply and demand fairly balanced but not crash prices, but keep them at price levels that generate good revenue.
There seems to be a lot of rumbling form and about Iran and the return of the US to the nuclear agreement that the Trump Administration pulled the US out of. The market doesn’t seem to concern at this point, but nothing is every easy or stable in the Middle East so worth keeping an eye on.
The extreme cold has certainly impacted refiners as roughly 20 refineries remain at partial or full reductions do to the weather. The impact of this loss production will likely not show up today in the inventory report but over the next few weeks.