Oil Futures Notch Weekly Gain as Texas Refiners Gauge Damages

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Except for the gasoline contract, oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange fell for the second session Friday. Refiners and oil producers in the south-central United States assessed equipment and processing units for potential damage after a rare Artic blast upended the energy supply chain in Texas this week. Early assessments suggest at least some refiners might take weeks to restore facilities to normal operations.

The potential for extended outages at Gulf Coast refineries lent support to RBOB futures in afternoon trading Friday, although the rest of the complex spent most of the session in the red after trading at better than one-year highs earlier this week.

U.S. crude benchmark for March delivery fell $1.28 at settlement to $59.24 barrel (bbl) after trading as high as $61.72 bbl earlier in the week ahead of contract expiration Monday afternoon. April West Texas Intermediate settled at near parity with the March contract at $59.26 bbl. April Brent futures on ICE declined nearly $1 for a $62.91 bbl settlement. NYMEX March ULSD futures plunged 1.35 cents to finish Friday at $1.8229 gallon and March RBOB futures gained 1.26 cents to settle at $1.8069 gallon.

The March WTI contract retreated 3.5% from this week's high as shale operators are expected to restore a large chunk of this week's lost production this weekend, according to industry insiders. For refiners however, the matter might be more complicated if equipment and processing units were damaged that could take weeks to repair. Refiners with scheduled turnarounds in March might also use the pause to simply pull that maintenance forward.

As of Friday afternoon, the following plants remain closed:

--Marathon's 585,000 barrels per day (bpd) Galveston Bay refinery in Texas City which reportedly sustained damage to equipment has a major turnaround scheduled for March.

--Exxon's 580,500 bpd Baytown refinery reportedly will be shut for a month or more, with no firm estimate yet as damage assessments continue.

--Exxon's 369,000 bpd Beaumont refinery will likely be down for at least several weeks.

--In Port Arthur, Total's 225,500 bpd refinery may also take several weeks to restore full operations as it repairs frozen water lines and instrumentation.

The situation in Texas will remain central to near-term fundamentals, therefore market focus will be on the timeline for these plants to restore normal operations. This week's inventory report showed nationwide crude and distillate supplies declined sharply during the week ended Feb. 12, while total demand for refined fuels jumped above the five-year average for the first time since the onset of the pandemic in March 2020. Crude and gasoline stockpiles fell in line with the five-year average mid-February and distillate stocks remained about 6% above that level. Refiners, meanwhile, increased run rates for each week this month, reaching a 14.819 million bpd processing rate during the reviewed week. It must be noted, however, this week's severe supply disruptions are not included in the data.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges