Meanwhile, analyst views Texas freeze as beneficial to meeting the five-year average: File Image/PixaBay
After four straight sessions of gains spurred partly by the Texas cold freeze, crude prices on Thursday took a dive of over 1 percent–but analysts think there is a silver lining to the production outages caused by the sub-zero weather conditions.
Prices also declined despite U.S. crude stockpiles falling by 7.3 million barrels in the week to Feb. 12, according to the Energy Information Administration, compared with analysts' expectations for a decrease of 2.4 million barrels; exports rose to 3.9 million barrels per day (bpd), the highest since March.
Brent on Thursday fell 72 cents, or 1.1 percent, to $63.62 per barrel, after surging above $65 due to the freeze, which was said to have knocked out 40 percent of the U.S.'s total output; West Texas Intermediate fell 89 cents, or 1.5 percent, to $60.25 per barrel.
Phil Flynn, senior market analyst, Price Futures Group Inc.
The market probably got a little bit ahead of itself
Phil Flynn, senior market analyst at Price Futures Group Inc., said of the gains leading up to today's drop, "The market probably got a little bit ahead of itself."
Meanwhile, in other signs of a tightening market, sales of physical crude made headlines on Thursday: "Spot prices are catching up with the rise in futures, especially in the North Sea," a European refining source told media on condition of anonymity, in reference to Brent physical crude rising to near dated Brent plus 90 cents per barrel.
Spot premiums for Russia's ESPO Blend crude, a China-focused grade, have also rebounded from a 4-month low to spot premiums near $2 per barrel.
For his part, Bjarne Schieldrop, chief commodities analyst at SEB, regarded the winter weather in Texas as beneficial to the commodity: "The temporary outage will help to accelerate U.S. oil inventories down towards the five-year average quicker than expected," he explained.
However, the freeze is short-lived, and Thursday also saw Marathon Oil Corp., Devon Energy Corp., and Verdun Oil Co. begin to use restored power from local grids or generators to restart output in the Eagle Ford shale basin; executives with interests in Texas think most of the production lost will return in a matter of days.