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Oil Sinks on Worries over Post-Texas Freeze, Iran

CommoditiesFeb 19, 2021 03:47PM ET
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Investing.com - Crude prices tumbled more than 2% Friday for their biggest slump since January on worries that an Arctic blast that disrupted production in Texas — the heartland of U.S. oil — could extend to refinery outages that pile up crude stocks.

Reports that Iran will “immediately reverse” actions in its nuclear program when U.S. sanctions are lifted, as assured by its foreign minister on Friday, also pressured crude lower.

New York-traded West Texas Intermediate crude settled down $1.27, or  2.1%, at $59.26 per barrel as players took profit on its run to 13-month highs of $62.27 in the previous session. WTI has not lost more than 2% since Jan. 15. For the week though, its lost was modest, at just 0.5%, after adjusting for gains in the first three days of trading. 

London-traded Brent, the global benchmark for crude, settled down $1.02, or 1.6%, at $62.91. Brent briefly broke above $65 on Thursday — its highest since January 2020.

After an unseasonably warm start to the 2020/21 winter, a hail of snow storms have descended upon the central and eastern United States in recent weeks. In Texas’ case, the freeze was so bad and unexpected, that oil and gas couldn’t flow like normal in key production basins.

Typically known for its sweltering weather most of the year, Texas initially looked like a white blanket after this week’s storms that shut down oil and gas production significantly in a state known for having temperatures of between 60°F (15.6°C) and 70°F (21.1°C).  At least 500,000 homes in Texas did not have power on Thursday morning after as many 4.0 million were impacted earlier by the worst snowstorm to hit the state in 30 years.

While oil production in Texas was resuming again Friday, lack of demand from refiners in the state will likely lead to builds in crude stocks over the coming weeks, even with 3.5 million barrels per day of U.S. output having been shut, ANZ Research said in a note carried by Reuters.

Analysts at Citigroup (NYSE:C) said in a separate note that some U.S. refineries might bring forward about 500,000 bpd of maintenance work normally scheduled for the spring over next month, ahead of the summer driving season.

In Iran's case, Foreign Minister Mohammad Javad Zarif reiterated Tehran's promise to back off from nuclear enrichment once Washington agreed to lift sanctions against the Islamic Republic.

The United States has said it is ready to talk with Iran about both nations returning to a 2015 agreement aimed at preventing Tehran from acquiring nuclear weapons. The deal, signed under former president Barack Obama, was abandoned nearly three years ago by his successor Donald Trump. 

Current President Joe Biden, who was vice president to Obama, has said he was keen to revive the agreement if Iran, which has enriched uranium capability by up to 20% to protest Trump’s crippling sanctions against Iranian oil, honored its previous commitments to the deal first.

“There was some selling on reports that Iran is promising to behave and that the US may once again join the Iranian nuclear talks,” said Phil Flynn, analyst at Chicago’s Price Futures Group.

Iran, at its height of production before Trump’s sanctions, pumped as much 4 million bpd and exported at least half of that. 

Analysts said the impact of Tehran’s production might be mitigated by output cuts by Saudi Arabia and other members and allies of the Organization of the Petroleum Exporting Countries, although market jitters could still put a lid on oil’s three-month long rally.

Oil Sinks on Worries over Post-Texas Freeze, Iran
 

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Comments (11)
Me comment
Me comment Feb 21, 2021 7:09PM ET
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Nothing really has changed, oil price spike on any good speculative news and falls on bad. Fundamentally supply is still far outpacing demand and oil prices should be in the mid forties not near 60.
Jesse Pylväläinen
Jesse Pylväläinen Feb 20, 2021 5:20AM ET
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Hmm, I have watched the EIA weekly reports and come to the conclusion that end user demand in the US is very close to pre-pandemic levels. Overall stockpiles are only 0,9% above last year while production is down about 2mbpd. This at the same time as just about every major oil company has pledged cash discipline. Now we have analysts saying, refinery demand is down while not a single word about end user demand. I think the event resembles a lot what we saw back in the days of Hurricane Harvey. Im fairly bullish on oil over the next 12-15weeks
Barani Krishnan
Barani Krishnan Feb 20, 2021 5:20AM ET
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Jesse, good observation as well. Let's see how the Yong and yang end up
Barani Krishnan
Barani Krishnan Feb 20, 2021 5:20AM ET
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Urrgh ... autocorrect. I meant to say let's see how the ying and yang end up :)
Ernest Wong CA
Ernest Wong CA Feb 20, 2021 5:20AM ET
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yeah right, don't just say it, do it, buy them up, pump, dump and then bust
Shane Gg
Shane Gg Feb 20, 2021 2:44AM ET
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Well they didn't sink enough. I want my NRGU back and want my NRGD to pay off. I sold my NRGU way too early.
Josh OBarr
Josh OBarr Feb 19, 2021 11:07PM ET
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Just made 10k off of ICD! Thank you Texas!
Catholic Man
CatholicMan Feb 19, 2021 7:00PM ET
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The nuclear agreemrnt was bad for the USA.
Barani Krishnan
Barani Krishnan Feb 19, 2021 7:00PM ET
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The agreement was doing its job and Iran was complying with all the stipulations till that thing called Donald came along. There was no provocation until then. He lit the fuse and voila, Saudi Arabia suffered with Abqaiq. The assassination of Soleimani led to Iran's mistaken downing of a commercial flight that killed so many civilians. Then their chief nuclear scientist got taken out in another hit whose origin doesn't require much intelligence to figure out. They didn't respond this time, fortunately. Had the IAA inspectors been allowed to do their work and the agreement kept in place, none of these might have happened.
Wayne Cammack
Wayne Cammack Feb 19, 2021 5:39PM ET
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Yeah Iran is going to behave. Yeah right
Barani Krishnan
Barani Krishnan Feb 19, 2021 5:39PM ET
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I don't know, Wayne. Take away a man's food, tie his hands to his back and force him to watch while others eat. How would he react, you think?
Amir Manocherry
Amir Manocherry Feb 19, 2021 5:39PM ET
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for real lol wayne doesnt know what to think
Barani Krishnan
Barani Krishnan Feb 19, 2021 5:39PM ET
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Amir Manocherry  Yes, I have to agree.
AmericaIsKing oftheGalaxy
AmericaIsKing oftheGalaxy Feb 19, 2021 5:28PM ET
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Look at that. Biden already organized fema to send aid, a unit created because states alone cant serve the millions of people who live in them in disasters like this alone. Its nice to see administration caring about people again
Barani Krishnan
Barani Krishnan Feb 19, 2021 5:28PM ET
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Indeed, Norse Winter, indeed.
Catholic Man
CatholicMan Feb 19, 2021 5:28PM ET
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Laughable vomment
Catholic Man
CatholicMan Feb 19, 2021 5:28PM ET
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Laughable comment, mr biden is vomit.
Barani Krishnan
Barani Krishnan Feb 19, 2021 5:28PM ET
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Catholic Man  Whatever Norse Winter says is fact -- that FEMA' s on the ground, working on White House instructions. It's laughable that you don't even know this. Don't make me gag, please.
michael engel
michael engel Feb 19, 2021 5:07PM ET
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US should take immediate action and build safe mini nukes molten salt,
Barani Krishnan
Barani Krishnan Feb 19, 2021 5:07PM ET
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Come on, you got to be smarter than that. The Iranians aren't going to *****their proverbial golden goose.
Mehmet Aksarayli
Mehmet Aksarayli Feb 19, 2021 4:39PM ET
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Mr Barani thanks for your thoughts. If I may ask how would cold weather effect Natural gas?
Barani Krishnan
Barani Krishnan Feb 19, 2021 4:39PM ET
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Hello Mehmet, thanks much for writing in. Natgas went as high as $3.316 this week on fears associated with the Texas freeze, before sliding back to 3.082 at today’s close as news surfaced of temperatures thawing in the Lone Star state. If natgas production starts normalizing again in Texas, then estimates for winter storage will improve and prices could continue consolidating, possibly to between $2.50 and $2.80. Earlier this week, some analysts who spoke to me floated the possibility of $4 gas if supply shocks emerged before the close of winter. I actually ran that possibility in my weekly roundup on natgas on Thursday. Some objected to that and I totally understood where they were coming from. But they also agreed that if there were more extreme weather events like Texas before the close of winter, such a possibility could not be excluded.
SunilKumar Dixit
SunilKumarDixit Feb 19, 2021 4:20PM ET
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I would like to see it fall more coming weeks
Barani Krishnan
Barani Krishnan Feb 19, 2021 4:20PM ET
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It will be interesting really Sunil to see if the market pays heed to the red signals many have been imploring about for weeks. It's no secret that you are following herds, you're so immersed in  direction that you ignore other variables in the market.
SunilKumar Dixit
SunilKumarDixit Feb 19, 2021 4:20PM ET
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Deep sympathies for the types of BOB MM and their pains though
Barani Krishnan
Barani Krishnan Feb 19, 2021 4:20PM ET
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SunilKumar Dixit  Whether what MM stands for really? I know it's a fake ID. But still ... :)
SunilKumar Dixit
SunilKumarDixit Feb 19, 2021 4:17PM ET
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Well Oil is down $3 from the high.... Finally.... Wonder where the I wonder where Bob MM, Jason Nguyen, Le Goat Taylor and other goats that follow them are.
Barani Krishnan
Barani Krishnan Feb 19, 2021 4:17PM ET
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Ha ha ... goats! That's what he and his bunch of grass-grazers are, Sunil. It's amazing that one joker is behind all those cloned IDs. Must be really frustrated for all the money he lost for months betting against oil's slump. I'm going to ask the administrators to message all the legitimate commentators on Investing about this fool and make sure they respond aggressively to him the next time we flag him anywhere on the site.
SunilKumar Dixit
SunilKumarDixit Feb 19, 2021 4:17PM ET
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Such creatures are way too afraid of coming in the open and they will be using masks on their faces. They will come with newer id and newer ip. Eventually they will allow themselves to be exposed by their narrative.
Barani Krishnan
Barani Krishnan Feb 19, 2021 4:17PM ET
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SunilKumar Dixit  Indeed, such goats. I feel for my administrators who had to spend time diligently this whole week tracking this fool when they could have better used their time for developmental efforts. Hopefully, the other readers here will spot him when he reemerges and really give it to him.
 
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