US commercial crude stocks climbed by 1.28 million barrels to 463.04 million last week as the Texas freeze pushed refinery demand to 12-year lows. Global Platts S&P has reported the total U.S. refinery net crude input plunged 2.59 million bpd to 12.23 million bpd, the lowest since the week ended September 2008, as refinery utilization fell 14.5 percent to 68.6 percent of capacity.
Even before the striking impact of the Texas snowstorm on the US energy industry, output had fallen greatly. The EIA reported that US oil production has decreased to 9.7 million bpd, down 1.1 million from the week before and 3.4 million lower than the US peak of 13.1 million bpd a year ago. Coming in addition to the 8.2 million bpd output cuts from OPEC+ (including Saudi Arabia’s additional 1 million bpd voluntary cut), this has reduced global supplies by about 11.6 million bpd, which has so far kept the market intact and helped oil prices to head for their fourth monthly gain.
There has been bullish talk that prices might reach $100. This is completely false, despite the upcoming spring refineries maintenance season in Asia, where China is getting ready with lower crude oil imports. Continuing fears over the coronavirus may even push Asian refineries to make deeper run cuts until oil prices advance into the $70s in the coming months.
Ironically, ahead of the OPEC+ meeting in early March, market participants and major shale oil producers are giving OPEC+ bullish signs to consider a modest production boost. These signals show the declining influence of US shale on OPEC and suggest that the organisation no longer needs to worry about the threat posed by the sector.