Oil gains as slow return of US crude output from icy weather raises supply concerns

Tokyo — Oil prices rose on Monday as the slow return of US crude output that was cut by frigid conditions raised concerns about supply just as demand is returning from the depths of the coronavirus pandemic.

Brent crude was up 76c, or 1.2%, at $61.67 a barrel by 3.04am, after gaining nearly 1% last week. US oil rose 74c, or 1.3%, to $59.98 a barrel, having fallen 0.4% last week.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4-million barrels per day (bpd) of crude production along with 594- million cubic metres of natural gas output, analysts estimated.

It is likely to take oilfield crews several days to de-ice valves, restart systems and begin oil and gas output. US Gulf Coast refiners are assessing damage to facilities and may take up to three weeks to restore most of their operations, analysts said, with low water pressure, gas and power losses hampering restarts.

“With three quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

“Longer term, the fall in capital expenditure at US shale oil companies this year will keep drilling activity subdued, leading to output remaining below prepandemic levels,” ANZ said.

For the first time since November, US drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

Reuters

Source: businesslive.co.za