Texas Refiners Race to Restore Operations
March 9, 2021
Energy Market closed lower yesterday after the news of a missile attempt on Saudi Arabia’s largest oil facilities caused no damage and did not upset production. On this news some traders lightened their long positions and took profits. The US dollar index also traded to a three and a half month high also putting some pressure on prices. The fact that this market is way overbought also helped the selloff but at this point the pullback only appears temporary in a market that is still in an uptrend.
Goldman Sachs Equity Research forecast WTI prices at $69.75 per barrel in 2021/2022. It sees Brent prices at $72.61 per barrel in 2021 and at $75 per barrel in 2022. It assumes the impact from weather disruptions in Texas and Oklahoma resulting in a 200,000 bpd negative impact to US oil production in the first quarter. It expects US oil production to increase by 300,000 bpd in the fourth quarter and sees an increase of 900,000 bpd in 2022.
Texas refiners are racing to restore operations knocked out by mid-February’s winter storm; however, they may be reluctant to come back at full capacity. They are weighing the risk of being stuck with an oversupply of fuel supplies. While the crack spread is trending near its highest since February of 2020, demand for this time of the year remains significantly lower than in March 2019, ahead of the pandemic. Refiners are also facing increasing cost for tradable credits known as RINs that are used to show compliance with the country’s Renewable Fuel Standard.
Total’s Chief Executive, Patrick Pouyanne, said it could take two years for the world economy to recover from the coronavirus pandemic and that oil prices were unlikely to remain at the current high of $70 per barrel. He said the right price is around $50-$60 per barrel.