Total U.S. oil production has plunged by one-third – the most ever – as an unprecedented cold blast freezes well operations across the central U.S., according to traders and industry executives with direct knowledge of the operations.
Crude output has now fallen by about 3.5 million barrels a day or more nationwide, they said, asking not to be identified because the information isn’t public. Before the cold snap, the U.S. was pumping about 11 million barrels a day, according to last government data. Production in the Texas’s Permian Basin alone – America’s biggest oil field – has plummeted by as much as 65 per cent.
Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd., said the production losses were “much higher than initial estimates” and warned that Permian output may not return to pre-freeze levels until Feb. 22.
“As producers need pipes to be fully running and power prices to normalize before they return production, a substantial return in production may not occur until this weekend at the earliest,” she said in a note to clients.
Operations in Texas have stumbled because temperatures are low enough to freeze oil and gas liquids at the well head and in pipelines that are laid on the ground, as opposed to under the surface as practiced in more northerly oil regions. The big question now is how quickly temperatures return to normal.
The huge scale of the disruption has helped oil prices to rise to their highest so far this year. It’s also threatening to starve oil refineries, although such is the chaos in Texas right now that many of the largest plants have already had to shut down.
Among the companies hit by outages is Occidental Petroleum Corp., the second-largest producer of oil in the Permian, which has issued a force majeure notice to suppliers, and Chevron Corp., which has shut in compression and production at wells in Culberson County in West Texas due to cold weather.
© 2021 Bloomberg L.P.