Meanwhile, Goldman says Texas freeze will have minimal, transitory impact: File Image/Pixabay.
The news that Texas producers would restart oil and gas fields following the winter freeze snap caused crude traders on Friday to extend the losses of the previous session, and as a result West Texas Intermediate fell by over 2 percent.
Brent ended the session down $1.02, or 1.6 percent, at $62.91 per barrel, while WTI fell $1.28, or 2.1 percent, to settle at $59.24; for the week, Brent was on track for a 1 percent gain while WTI was largely flat.
Jim Ritterbusch, president of Ritterbusch and Associates, pointed out that “Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration.”
John Kemp, Reuters
Market rebalancing [in the U.S.] has been completed earlier than seemed likely
However, he added that "The magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output.”
Goldman Sachs predicted the Texas freeze will cause minimal market impact: it estimated an average decline of 700,000 barrels per day (bpd) in February production of U.S. Lower-48 onshore crude and a quick output rebound on expectations of warmer weather this weekend.
It said in a note, “While the gross impacts on supply and demand are large, they are mostly offsetting, and even more importantly, transitory, resulting in minimal implications for global oil prices, leaving risks to a further reversal of this week’s rally,”
Looking at the broader picture, Craig Erlam, senior market analyst at OANDA, said, “Vaccines and the impressive rollouts we’ve seen have delivered strong gains, as have the efforts of OPEC+ - Saudi Arabia, in particular - and the big freeze in Texas, which gave oil prices one final kick this week.
“With so many bullish factors now priced in, it seems we’re seeing some of these positions being unwound.”
As for demand recovery in the wake of the Covid vaccines causing infection rates to plummet globally, John Kemp, commodities analyst for Reuters, noted that "Market rebalancing [in the U.S.] has been completed earlier than seemed likely a few months ago."
He added that "With the exception of jet, most other indicators of production, consumption, and inventories should return to normal by the end of the first quarter, rather than the end of the second, as seemed likely last autumn."
The volume of products supplied excluding jet in the four weeks ending Feb. 12 was 18.7 million bpd, 0.6 percent above the seasonal average for 2016-2020.
An equally upbeat sentiment about demand recovery was provided on Friday by Kerry Craig, global market strategist at JPMorgan Asset Management: she said with major economies pressing ahead with their Covid vaccination campaigns, “I think there’s room for oil prices to move a little bit higher in this environment but, you know, not thinking about a price of $80 or $90 a barrel; maybe it goes up by $5 or $10 more from here.”