Not only do traders and executives now believe losses are larger than previously expected, they also fear they will be longer lasting. The Permian basin — America’s biggest oil field — is the region worst affected, with output down between 65% and 80% from normal levels, traders and executives said.
Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd., said the production losses were “much higher than initial estimates” and warned that Permian output may not return to pre-freeze levels until Feb. 22.
“As producers need pipes to be fully running and power prices to normalize before they return production, a substantial return in production may not occur until this weekend at the earliest,” she said in a note to clients.
Operations in Texas have stumbled because temperatures are low enough to freeze oil and gas liquids at the well head and in pipelines that are laid on the ground, as opposed to under the surface as practiced in more northerly oil regions. The big question now is how quickly temperatures return to normal.
Oil output from just the Texas portion of the Permian patch was estimated at only 600,000-700,000 barrels a day on Tuesday, down from its typical volume of 3.5 million barrels a day, said Bert Gilbert, head of North American Business Development at OilX, an oil-data analytics startup.
The huge scale of the disruption has helped oil prices rise to their highest so far this year. It’s also threatening to starve refineries, although such is the chaos in Texas currently that many of the largest plants have already had to shut down.
Among the companies hit by outages are Occidental Petroleum Corp., the second-largest producer of oil in the Permian, which has issued a force majeure notice to suppliers, and Chevron Corp., which has shut in compression and production at wells in Culberson County in West Texas due to the cold blast. Plains All American Pipeline LP and Oryx Midstream Services LLC have also issued force majeure notices to their customers with weather conditions disrupting power supply and plant operations.