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Oil prices fell 2% at the start of trade on Friday, adding to overnight declines over fears that refineries will be slow to resume operations after the big freeze in the southern United States, creating a demand gap. , while OPEC + supplies are expected to rise.
“The market was ripe for a correction and signs of normalizing the overall energy and energy situation in Texas provided the necessary trigger,” said Vandana Hari, energy analyst at Vanda Insights.
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U.S. West Texas Intermediate (WTI) crude futures fell $ 1.14, or 1.9%, to $ 59.38 a barrel at 4:21 a.m. GMT, after falling 1% on Thursday.
Brent futures fell $ 1.03, or 1.6%, to $ 62.90 a barrel, after falling 0.6% on Thursday.
Both benchmark contracts hit 13-month highs on Thursday due to the historic freeze in the southern states of the United States. While analysts estimate extreme cold has blocked up to a third of U.S. crude production, attention has now turned to the impact on refiners.
Lack of demand from Texas refiners will likely lead to a build-up of crude inventories over the next few weeks, even though about 3.5 million barrels per day (bpd) of U.S. oil production has been shut down, ANZ Research said in a report. note.
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Citi analysts said in a note that some US refineries could offer about 500,000 bpd of maintenance normally scheduled for spring next month, ahead of the summer driving season.
On Friday, the WTI price curve before the month plunged into a shallow contango as low as minus 4 cents on Friday, a market structure in which barrels near the month are cheaper than those in subsequent months, implying a current oversupply.
“The small contango … likely indicates that market expectations for US crude production and supply (including imports) are recovering faster than refining capacity blocked in Texas by the deep freeze,” said Hari.
U.S. crude inventories fell more than expected in the week of February 12, before the freeze, as inventories fell 7.3 million barrels to 461.8 million barrels, their lowest since March, the l ‘Energy Information Administration.
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Attention is also turning to an impending increase in crude oil supplies for the Organization of the Petroleum Exporting Countries and its allies, known as OPEC +.
OPEC + sources told Reuters the group’s producers would likely ease supply brakes after April given the price recovery.
The United States said Thursday it was ready to talk to Iran about the two countries returning to a 2015 deal to prevent Tehran from acquiring nuclear weapons.
While the thaw of relations could raise the prospect of a reversal of sanctions imposed by Trump, analysts did not expect Iranian oil sanctions to be lifted anytime soon.
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“It’s going to be a long way,” Hari said, referring to the US-Iran negotiations.
(Reporting by Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Tom Hogue & Simon Cameron-Moore)
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