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Oil Prices Jump After Texas Storm Skews US Output Data

CommoditiesFeb 24, 2021 03:09PM ET
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Investing.com - Oil prices hit 13-months highs again Wednesday after the U.S. government reported that crude production across the country fell by more than a million barrels per day last week after the mega snowstorm that blanketed Texas, the energy heartland of the country.

The Energy Information Administration also reported a surprise crude stockpile build of 1.3 million barrels last week, versus market expectations for a draw of 5.2 million barrels.

Gasoline inventories also came in somewhat bearish, rising by 12,000 barrels, compared with forecasts for a drop of 3.06 million.

But the trade’s attention was drawn instead toward the production estimate of 9.7 million barrels per day at the end of the week to February 18, versus the 10.8 million bpd projected during the week to February 11.

The market also prioritized the data on distillate stockpiles, which included diesel and heating oil. This showed a drawdown of 4.97 million barrels — above the 3.75 million anticipated by the market — reflecting the immense need for heating amid frigid weather across the United States.

New York-traded West Texas Intermediate, the benchmark for U.S. crude, settled up $1.55, or 2.5%, at $63.22 per barrel, after rallying to a January 2020 high of $63.37.

London-traded Brent, the global benchmark for oil, finished the session up $1.70, or 2.6%, at $66.18 per barrel. Brent hit a session high of $66.35 earlier, chasing Tuesday’s 13-month high of $66.79.

Investing.com analyst Barani Krishnan said the rally was in direct response to the EIA report, which had been skewed by the Texas storm.

“There are huge, huge number changes across the board this time due to the Texas situation,” he said.

“Production is down 1.1 million bpd on the week.  Refineries ran at 68.6% of their operable capacity last week, versus 83.1% in the previous week. That’s down almost 15% — a collapse literally due to Texas, no doubt.” 

After an unseasonably warm start to the 2020/21 winter, snowstorms have descended upon the central and eastern United States in recent weeks, boosting demand for heating oil. Exacerbating the situation was an Arctic blast in Texas last week that resulted in a freeze so bad 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 the blitz in the state known for holding  temperatures of between 60°F (15.6°C) and 70°F (21.1°C) throughout the year.  

More than four million homes in Texas did not have power right after the storm as the state’s electricity grid got knocked out, and many still do not have water supply more than a week after the state’s worst snowstorm in 30 years.

With Texas staggering back to its feet this week, both oil producers and refiners in the state were struggling to get back to optimal output. 

U.S. crude production hit record highs of 13.1 million bpd in March 2020, just  before the outbreak of the coronavirus pandemic. It had fallen since, stabilizing at between 10.5 million and 11.0 million bpd, before last week’s plunge to 9.7 million as reported by the EIA.

Krishnan cited other anomalies in the report, such as a drop of 1.5 million bpd in exports of crude versus a 1.3 million bpd slide in imports. 

He said the Cushing, Oklahoma delivery point for contracted barrels of WTI also saw a build of 2.8 million barrels, probably due to the freeze that prevented oil from leaving the system. 

“In the final mix, the numbers don’t really add up, and we’re likely to see more volatility in EIA data over the next two weeks,” Krishnan said.

 

Oil Prices Jump After Texas Storm Skews US Output Data
 

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Comments (10)
Alan Rice
Alan Rice Feb 24, 2021 5:59PM ET
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Problem is not a cruddy Buck. It is the Worldwide squandering of Earths finite natural resources.Do you drive ?? Y: You are part of the problem. N: Thankyou .
Mehul Joshi
Mehul Joshi Feb 24, 2021 12:43PM ET
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So this is good time to buy oil or sell ? Please give best recommendation ?
Edward Chong
Edward Chong Feb 24, 2021 12:43PM ET
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not much time left. next week is the meeting. its your own judgement now.
Leo Florentino
Leo Florentino Feb 24, 2021 12:43PM ET
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Bearish divergence too
Kristo ivanov
Kristo ivanov Feb 24, 2021 11:19AM ET
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ch $$ 💦💦
Syed Hasan
Syed Hasan Feb 24, 2021 11:00AM ET
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We are supposed to short oil.. surprising market reaction
Benhard Octavius
Benhard Octavius Feb 24, 2021 10:47AM ET
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why the news not match with the price movement
shubham pawar
shubham pawar Feb 24, 2021 10:47AM ET
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because its down trend
David Gonçalves
David Gonçalves Feb 24, 2021 10:47AM ET
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How they creat this news a 1 hour ago if the result have been published 15 min ago?
SANAJY JAYSWAL
SANAJY JAYSWAL Feb 24, 2021 10:44AM ET
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us oil sell or buy???
Lae Edwards
Lae Edwards Feb 24, 2021 10:41AM ET
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everyone is holding on to hope of oil so the price will rise....Green energy will soon show it's head... so ride while we can....
fab fiveuser
fab fiveuser Feb 24, 2021 10:37AM ET
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But oil price still goes up. These UK traders are good!
Mohammad Albader
Hamoud Feb 24, 2021 10:37AM ET
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shouldn't oil be down on this news?
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Sandilya Tripathi
Sandilya Tripathi Feb 24, 2021 10:37AM ET
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Nordin Kurnia
Nordin Kurnia Feb 24, 2021 10:37AM ET
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Ya by right it should fall.
Mohammad Albader
Hamoud Feb 24, 2021 10:37AM ET
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Zolo Milan
Zolo Milan Feb 24, 2021 10:37AM ET
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In my opinion, spx 500 energy sector went up. And also big traders pushed up prices. The price will increase at least 100 to 150 pips up in order to burn the small account. The most important thing is candle pattern and spx 500 energy sector. Good luck for daytraders
SunilKumar Dixit
SunilKumarDixit Feb 24, 2021 10:37AM ET
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Too early to take a buy call until WTI Crude has a monthly closing above 62.25 which is 100 months Simple Moving Average, which if confirmed, sets aim for 69.75 straight. Else brace for a robust price distribution cycle to trigger correction to expose 55.40 and 53.40
 
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