Investing.com – Crude prices tumbled more than 2% Friday for their biggest slump since January on worries that an Arctic blast that disrupted production in Texas — the heartland of U.S. oil — could extend to refinery outages that pile up crude stocks.
Reports that Iran will “immediately reverse” actions in its nuclear program when U.S. sanctions are lifted, as assured by its foreign minister on Friday, also pressured crude lower.
New York-traded crude settled down $1.27, or 2.1%, at $59.26 per barrel as players took profit on its run to 13-month highs of $62.27 n in the previous session. For the week, WTI dipped 0.5%.
London-traded , the global benchmark for crude, settled down $1.02, or 1.6%, at $62.91. Brent briefly broke above $65 on Thursday — its highest since January 2020.
After an unseasonably warm start to the 2020/21 winter, a hail of snow storms have descended upon the central and eastern United States in recent weeks. In Texas’ case, the freeze was so bad and unexpected, that oil and gas couldn’t flow like normal in key production basins.
Typically known for its sweltering weather most of the year, Texas initially looked like a white blanket after this week’s storms that shut down production significantly in the state known for temperatures of between 60°F (15.6°C) and 70°F (21.1°C). At least 500,000 homes in Texas did not have power on Thursday morning after as many 3.1 million were impacted a day earlier by the worst snowstorm to hit the state in 30 years.
While production was resuming again on Friday, lack of demand from Texan refiners will likely lead to builds in crude stocks over coming weeks, even though around 3.5 million barrels per day of U.S. oil output has been shut, ANZ Research said in a note carried by Reuters.
Analysts at Citigroup (NYSE:) said in a separate note that some U.S. refineries might bring forward about 500,000 bpd of maintenance work normally scheduled for the spring over next month, ahead of the summer driving season.
Mohammad Javad Zarif reiterated Tehran’s position on Washington’s offer to revive talks after the United States said it was ready to talk to Iran about both nations returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons.
The deal, signed under former President Barack Obama, was abandoned nearly three years ago by his successor Donald Trump.
Current President Joe Biden, who was vice president to Obama, has said he was keen to revive the agreement if Iran, which has enriched uranium capability by up to 20% to protest Trump’s crippling sanctions against Iranian oil, honored its previous commitments to the deal first.
“There was some selling on reports that Iran is promising to behave and that the US may once again join the Iranian nuclear talks,” said Phil Flynn, analyst at Chicago’s Price Futures Group.
Iran, at its height of production before Trump’s sanctions, pumped as much 4 million bpd and exported at least half of that.
Analysts said the impact of Tehran’s production might be mitigated by output cuts by Saudi Arabia and other members and allies of the Organization of the Petroleum Exporting Countries, although market jitters could still put a lid on oil’s three-month long rally.
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