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Oil drops as investors gauge big chill impact on U.S. refineries

Published 02/19/2021, 10:05 AM
Updated 02/19/2021, 10:10 AM
© Reuters.
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By Sonali Paul
MELBOURNE, Feb 19 (Reuters) - Oil prices slid as much as 2%
in early trade on Friday, adding to overnight declines, on
worries that refineries shut by a big freeze in the U.S. South
will take some time to revive operations and dent crude demand.
U.S. West Texas Intermediate (WTI) crude CLc1 futures fell
$1.21, or 2%, to $59.31 a barrel at 0157 GMT, after declining 1%
on Thursday.
Brent crude LCOc1 futures dropped $1.07, or 1.7%, to
$62.86 a barrel, after declining 0.6% on Thursday.
Both benchmark contracts rallied to 13-month highs on
Thursday driven by the historic freeze in U.S. southern states.
While analysts estimate the extreme cold has shut in as much as
one-third of U.S. crude production, attention has now turned to
the impact on refiners.
"The market is concerned about the refinery outages in
Texas, where arctic weather has caused power outages and frozen
wells and pipes," ANZ Research said in a note.
The lack of demand from refineries will likely lead to
builds in crude stocks over coming weeks, even though around 3.5
million barrels per day (bpd) of U.S. oil output has been shut,
ANZ said.
Citi analysts said in a note that some U.S. refineries might
bring forward maintenance work normally scheduled for the
spring, ahead of the summer driving season.
"Refinery outages could be deeper and longer lasting,
especially ahead of the spring maintenance season, as some
plants could decide to anticipate planned turnarounds of roughly
500-k b/d on aggregate over the next month," Citi analysts said.
U.S. crude stockpiles fell more than expected in the week to
Feb. 12, before the freeze, with inventories down by 7.3 million
barrels to 461.8 million barrels, their lowest since March, the
Energy Information Administration reported on Thursday. EIA/S


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