Oil Falling as Investors Evaluate The Impact of Severe Cold on US Refineries

Oil prices fell by more than 1% today, Friday, to continue declines recorded overnight, due to fears that refineries will take time to resume operations after a wave of freezing weather in the American South, causing a gap in demand, while OPEC+ supplies are expected to rise.

Brent crude futures fell 87 cents, or 1.4%, to $63.06 a barrel, while US West Texas Intermediate crude futures fell 82 cents, or 1.4%, to $59.70 a barrel.

The two benchmarks rose to their highest level in 13 months on Thursday, driven by the historic freezing weather in the US southern states.

While analysts’ estimates indicate that extremely cold weather has halted up to a third of US crude production, attention is now shifting to the impact on refiners.

ANZ Research said in a note that the absence of demand from Texas refineries will likely lead to an increase in crude stocks in the coming weeks, despite the halt in production of about 3.5 million barrels per day of US crude.

The US Energy Information Administration reported on Thursday that US crude inventories fell more than expected in the week ending February 12, before the cold weather, as inventories fell 7.3 million barrels to 461.8 million barrels, their lowest level since March.

Attention is also directed to an imminent increase in crude oil supplies from the Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+.

OPEC+ sources told Reuters that the group’s producers would likely ease supply restrictions after April due to the recovery in prices.