The cold spell that swept across the United States this weekend has caused a drop in oil production of up to 2 million barrels daily, Reuters reported, citing analysts and traders.
According to estimates by Energy Aspects, the Permian alone saw production outages of around 1.5 million barrels daily. However, production is already recovering, and the lost output in the Permian is down to some 700,000 barrels daily. Output is expected to be fully restored by the end of the month.
Bloomberg reported Monday that refiners were also curtailing operations amid the frigid weather that caused a surge in electricity demand and fears that low temperatures could compromise gas supply, as they did five years ago during Winter Storm Uri. Indeed, the weather may have caused a 22% production drop in natural gas in the southern central U.S. corridor, Bloomberg cited a TP ICAP Group analyst as saying. This could mean an oil production drop of 1 million barrels daily in that region, Scott Shelton added.
Among the companies reporting trouble with production, Reuters listed Exxon, Occidental, Chevron, and ConocoPhillips. Conoco’s oil production was down by a reported 175,000 barrels daily in the Permian, according to an unnamed source. The company did not confirm the figure.
Meanwhile, natural gas production in the Lower 48 has reportedly dropped to 106.9 billion cu ft daily since the start of the month, according to LSEG data cited by Reuters. That compares with an all-time high of 109.7 billion cubic feet daily for December.
The oil production decline has failed to have a lasting effect on international oil prices, but the gas production disruption has caused a surge in gas prices that will send ripples across the global LNG market, given the United States’ dominant role in it. Over the last week alone, U.S. gas prices surged by 70% before starting to subside.
By Irina Slav for Oilprice.com
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