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Hazloc Heaters
Copper Tip Energy Services
Copper Tip Energy
Hazloc Heaters

Oil Erases Gains Amid Reports of Saudi Production Increase

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These translations are done via Google Translate

By Andres Guerra Luz and Grant Smith

(Bloomberg) Oil dipped amid reports that Saudi Arabia will reverse unprecedented production cuts as prices recover.Futures erased gains in New York on Wednesday after Dow Jones reported that Saudi Arabia plans to boost oil output in the coming months, citing unnamed advisers to the kingdom. While Saudi Arabia’s unilateral cuts this year came as a surprise to the market when it was announced, many investors had expected the producer to raise output come April. At the same time, Saudi Arabia is urging fellow members of the OPEC+ oil alliance to remain cautious as they prepare to consider further supply increases.“We’re at a very delicate point here,” said Bob Yawger, head of the futures division at Mizuho Securities. OPEC+ has “to make sure the associated demand is there before increasing the barrels and not kill the golden goose here, which is what they’ll do if they add everything at once.”

Prices turn lower after rallying to one-year highs recently

Meanwhile, a deepening energy crisis is still playing out in the U.S., with some 3.5 million barrels a day of American output halted, according to traders and industry executives, as a cold blast freezes well operations and cuts power across the central U.S. That’s being offset, however, by the suspension of more than 3 million barrels a day of refining capacity, according to Energy Aspects Ltd.

“The production loss is significant and could last for several days if not weeks,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd.

  • West Texas Intermediate for March delivery fell 22 cents to $59.83 a barrel as of 9:33 a.m. in New York
  • Brent for April settlement gained 6 cents to $63.41 a barrel

Temperatures in Texas are now low enough to freeze oil and gas liquids at the well head and in pipelines laid on the ground. They’re put under the surface in colder regions. Before the crisis, the U.S. was pumping about 11 million barrels a day, according to government data. Production in the Permian Basin alone — America’s biggest oil field — has plummeted by as much as 65%.

Sky Eye Measurement
Sky Eye Measurement

In Russia, meanwhile, freezing temperatures are also contributing to production curtailments. The expected increase in the nation’s February oil output has so far not materialized, as some fields curb pipeline flows due to the abnormally cold weather.

While WTI’s prompt timespread has flipped back into contango, the similar spread for Brent has moved more into a bullish backwardation structure. The April contract is 64 cents a barrel more expensive than for May, indicating tight prompt supplies, compared with 29 cents at the beginning of last week.

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