Picture: REUTERS
Picture: REUTERS

Melbourne — 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 US South will take some time to revive operations and dent crude demand.

US West Texas Intermediate (WTI) crude futures fell $1.21, or 2%, to $59.31 a barrel at 1.57am GMT, after declining 1% on Thursday.

Brent crude 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 US southern states. While analysts estimate the extreme cold has shut inasmuch as one-third of US crude production, attention has now turned to the effect 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 about 3.5-million barrels per day (bpd) of US oil output has been shut, ANZ said.

Citi analysts said in a note that some US 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 500,000 bpd on aggregate over the next month,” Citi analysts said.

US crude stockpiles fell more than expected in the week to February 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.

Reuters

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.