Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Oil producers eye long road to recovery as Texas begins to thaw

CommoditiesFeb 22, 2021 07:10AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: A man walks to his friend's home in a neighbourhood without electricity as snow covers the BlackHawk neighborhood in Pflugerville 2/2

By Devika Krishna Kumar and Laila Kearney

NEW YORK (Reuters) - Shale oil producers in the southern United States could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output that shut down because of cold weather, as frozen pipes and power supply interruptions slow their recovery, sources said.

The winter storm that gripped Texas and much of the country over the past week forced the biggest ever weather-related shutdown in the Permian Basin, cutting 2 to 4 million bpd from nationwide oil output and hitting the roughly 5 million barrels produced each day from top shale producing state Texas especially hard.

The shut in oil production represents 2 to 4% of global supply, so a slow recovery would tighten worldwide crude markets and may bolster prices that already hit a one-year peak earlier this week.

There may be glitches in supply as utilities assess and repair damage, industry sources said.

"I think it will be a while before things get better out in the field," one executive at a Permian producer said, on condition of anonymity.

Typically, oil production can be restarted quickly after cold weather, but the scale of the shutdown is unique, said Jodi Quinnell, research director at energy researcher and consultancy Wood Mackenzie.

"Within the Permian, it's definitely different this time around, partially because of the sheer amount of production taken offline," Quinnell said.

Permian Basin oil production is down 35%, dipping below 3 million barrels a day in output for the first time since 2018, according to Wood Mackenzie data.

Problems in accessing the fields and equipment could slow the recovery, executives at oil companies said.

Some companies that truck equipment and workers into Texas shale basins to repair frozen wells and gathering lines have been unable to access certain roads due to icy conditions, a worker at one Texas trucking company said.

Several midstream companies, including Oryx Midstream, a Permian-based gathering and logistics company, as well as TC Energy (NYSE:TRP)'s Marketlink pipeline, have declared force majeure as power disruptions impede their ability to receive and pump barrels.

"This situation is a little different, where if you have continued power issues, you can't run pump stations and compressors and things like that," said Ryan Smith, East Daley Capital's research director.

Producers are also grappling with a lot of actual freeze-offs, truck issues and mechanical problems at tank farms, one source at a merchant that works with Permian oil producers said.

"It's not like power comes back on and you flip the basin back on it," the source said, predicting production could be at about 50% on Monday but take a few weeks to be at 100%.

The production decline from wellhead freeze-offs is expected to total 16 to 18 million barrels in February, J.P. Morgan analysts estimated.

Still, producers are unlikely to make major investments to prevent problems like this recurring, analysts and company officials said. Many consider the freeze-off a once-in-a-century event.

"It's a cross benefit analysis. They're thinking, how often does this happen, are we going to deal with this once a decade? It's not really worth it for them to guard against an outlier event," said John Kilduff, partner at Again Capital in New York.

Oil producers eye long road to recovery as Texas begins to thaw
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (3)
Alan Rice
Alan Rice Feb 22, 2021 2:09PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Modern-day Myth: OIL "Producers". ( It takes EARTH 20,000,000 YEARS to "produce" oil.) Earth: The next Mars ??
Paul Driskill
Paul Driskill Feb 22, 2021 10:21AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Isn’t that what they are in business for?  Profits?
Ernie Keebler
Ernie Keebler Feb 22, 2021 9:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Sure wouldn't want to cut into profits, especially when disruptions like this increase their bottom line no matter what kind of havoc it wreaks on consumers, don't prepare for the next time, gotta make more money
Matt Novakovich
Matt Novakovich Feb 22, 2021 9:05AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
yes. that's why they drill your fuel. To make money.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email