New York — Crude oil price declines continued Feb. 19 as the market eyed rising supply outlooks amid the restart of Texas production and easing US-Iran tensions.
NYMEX March WTI settled down $1.28 at $59.24/b and ICE April Brent declined $1.02 to $62.91/b.
Crude prices continued to shed premiums as temperatures climbed in Texas, lessening strain on the region’s infrastructure and allowing producers to return shut-in output to service.
Severe cold weather took about 90% of Texas crude production offline earlier this week. That output is expected to come back online this weekend, according to S&P Global Platts Analytics. Around 2.2 million b/d of crude production was still offline as of Feb. 19, Platts Analytics data showed, down from a peak of around 3.8 million b/d earlier in the week.
A second day of falling crude prices put futures back to around pre-storm levels seen late last week.
The market was also eyeing the potential return of Iranian crude output amid signs of a thaw in Washington-Tehran relations.
The Biden administration on Feb. 18 formally offered to restart negotiations with Tehran, inching the two sides closer to a deal that could see the restoration of Iran’s approximately 2.6 million b/d export capacity.
Focus is also on the potential for an easing of production cuts by OPEC and its key allies — another bearish factor for crude prices. The group is due to meet on March 4 to discuss April production quotas, with signs beginning to emerge that they may be relaxed following the recent rise in prices.
“Considering that supply management remains the primary factor contributing to the sector’s recovery,” TD Securities analysts wrote in a note, “the risk is that OPEC+ discipline and compliance may soon be peaking, as the higher price environment incentivizes nations to unwind the excess capacity into the market in just a few months.”
RBOB remains strong amid USGC refinery disruptions
NYMEX RBOB futures gave back most of their early session gains, but still settled in the black with the front-month March contract finishing up 1.26 cents at $1.8069/gal. NYMEX March ULSD settled 1.35 cents lower at $1.8229/gal.
RBOB futures have seen outsized support in recent sessions as severe weather forced most of Texas’ over 5.9 million b/d of refining capacity offline earlier this week. While most USGC refineries were expected to move toward normal operations with the return of a stable power grid and reliable sources of natural gas, nitrogen, and hydrogen, the prospect of extended outages at some facilities continued to support prices, sources said.
RBOB futures surged to a session-high $1.8384/gal in early US trading, but then steadily declined throughout the session, falling into negative territory in aftermarket trading.
Motiva said in a Feb. 19 statement it was assessing the impacts to its 607,000 b/d Port Arthur, Texas, refinery as it gets ready to restart the plant, while market sources said other plants could face delays of several weeks before start-up.
Other plants that could see delayed restarts are ExxonMobil’s Beaumont and Baytown refineries, Total’s Port Arthur plant, and Marathon’s Galveston Bay refinery, a source familiar with the region’s refinery operations said.
Marathon would not comment on its operations. Company spokespeople from ExxonMobil and Total were not immediately available for comment.
ICE New York Harbor RBOB crack versus Brent climbed to around $15.90/b in afternoon trading, up from a Feb. 18 close of $15.33/b and up more than $3/b from pre-storm levels of $13.75/b Feb. 12.
With pre-planned shoulder-season turnarounds on the horizon, there are growing concerns that refiners may choose to simply put idled units into maintenance early, Price Futures Group analyst Phil Flynn said.
“There is more talk about ‘why ramp up production for a few weeks when we are just going to go into maintenance,'” Flynn said. “I’m getting the sense that we will see extended maintenance early, and that will tighten things.”
