Oil prices fell more than 1% on Friday due to fears that refineries will take a long time to resume operations after freezing in the southern United States. This will create a gap in demand despite initial expectations of OPEC + supply growth.
“The market has been ripe for a correction, and the signs of strength and the overall energy situation that are beginning to return to normal have triggered this correction,” said Vandana Hari, an energy analyst at Vanda Insights.
Brent oil futures fell 87 cents (-1.4%) to $ 63.06 per barrel and West Texas Intermediate (WTI) futures fell 82 cents (-1.4%) to $ 59.70 per barrel.
Analysts estimate that the extreme winter closed up a third of US oil production, so attention has now turned to the impact on refineries.
Lack of demand from Texas refineries is likely to lead to an increase in crude stocks in the coming weeks, although production of approximately 3.5 million barrels of oil per day (bpd) has been suspended, ANZ Research said in a report.
U.S. oil inventories fell more even before the harsh winter than expected in the week to February 12, falling 7.3 million barrels to 461.8 million barrels, the lowest level since March, the Energy Information Administration said on Thursday.
Attention is also drawn to the impending increase in oil supplies from the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.
OPEC+ sources told Reuters that the group’s producers are likely to ease supply restrictions after April due to price recovery.
The United States said on Thursday that they are ready to talk to Iran about the agreement return from 2015 to prevent Tehran from acquiring nuclear weapons.
Although better relations could increase the prospect of lifting sanctions imposed by the Trump administration, analysts do not expect Iran’s oil sanctions to be lifted in the foreseeable future.
“It will be a long journey,” Hari told the US-Iran talks.