U.S. shale oil production in the first quarter will be lower than previously expected because of the sub-zero temperatures and snowstorms that put Texas in the spotlight last week and pushed oil prices higher.
Reuters cites several shale oil producers, including Occidental and Diamondback Energy, which expect a slow recovery in production as frozen pipelines and well equipment removed some 2 million bpd from the U.S. total.
What’s more, some of the lost production may never return because it would be too expensive to restart some smaller wells, analysts said. The wells that will be restarted will need about two weeks, according to the oil companies Reuters talked to.
The news of lower output for longer pushed oil prices up by $1 on Tuesday in Asian and European trading, helped by continuing vaccine optimism.
“The positive momentum continues in the oil complex, with investors unabashedly predisposed to a bullish view,” Reuters quoted the chief global markets strategist of Axi, Steven Innes, as saying.
Refineries along the Texas Gulf Coast are also restarting after the outages that took more than two million barrels in daily refining capacity offline.
Saudi-owned Motiva, the largest refinery in the U.S., notified the Texas Commission on Environmental Quality that it would begin a 17-day restart process on Monday.
Marathon Petroleum also began restarting the shut down units of its refinery in Galveston, and Exxon is also preparing to bring its shut down facilities back online.
The Texas Freeze knocked out as much as 4 million bpd of U.S. oil production and 6 million bpd of refining capacity last week, IHS Markit said. The production outages have created a tighter supply situation that has been absent for most of the pandemic, boosting prices.
Yet even before the Freeze, OPEC and U.S. oil industry insiders expected shale production to be slow to rebound from the pandemic lows as companies remain cautious with their spending plans.
By Charles Kennedy for Oilprice.com