IHS Markit, (NYSE: INFO), a world leader in critical information, analytics and solutions is providing periodic updates on the state of U.S. crude, refining and chemical operations following the impacts of Winter Storm Uri.
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A summary of the key conclusions follows here:
“While U.S. crude production has mostly returned to normal, refining and petrochemical facilities are still more of a mixed bag in terms of recovery. The coming days should see significant progress but a return to pre-storm levels across all sectors is unlikely until the second half of March. The worst of the storm is definitely behind us, but we are still in the middle act when it comes to a holistic recovery.” – Bill Hyde, executive director, IHS Markit
March output is expected to be marginally lower than pre-storm outlook (about 75,000 b/d less) due to losing a week’s worth of well completions. However, IHS Markit expects that any volume losses will be offset by new well additions later in the second quarter, meaning that no significant impact to 2021 exit production volumes is expected.
Natural Gas Liquids (NGLs)
U.S. NGL production, except ethane, has been restored to pre-storm levels. Ethane balances face some challenges as demand remains well below pre-storm levels. C3+ field production is back to 3.2 MMb/d. Exports out of Houston Ship Channel appear to have resumed normal operations after the disruptions caused by the storm and heavy fog.
Refineries operations continue to be impacted by the winter storm, as they try to return from cold-standby. In the past week, all refineries outside of the immediate vicinity of Gulf Coast are operational. 3.3 million b/d of capacity (out of the 6.0 million b/d total capacity impacted by the storm) is still in the process of ramping up with most refineries expected to be operational by next week. Both gasoline and diesel demand saw historic draws for the past week as supply fell dramatically.
Natural Gas / LNG
U.S. natural gas production levels recovered from mid-February output lows, although the lost production due to freezing weather did make the final average daily supply the lowest in 30 months. Most production is bouncing back with the Permian basin taking longer. U.S. LNG export feed demand levels wound down during the winter storm due to reduced feed flows in the Gulf Coast region. March futures reached a high of $3.30 MMBtu as conditions returned to normal towards the end of February.
Fuel Terminal, Retail and Pricing
Gasoline product supply recovered nearly 1 million b/d of the lost demand from the winter storm. Retail gasoline prices continue to rise with refining capacity still ramping back up. OPIS demand jumped about 7% in week to week volumes.
Fuel demand appears to be back at pre-deep freeze levels. Demand has gotten back to within one million b/d of year ago levels but staying there may be a challenge as the first week of March 2020 was the highest demand for the first week of the third month on record.
Meanwhile, OPIS demand readings captured a 7% jump in week to week stations volumes, led by a recovery in Southwest states like Texas and Oklahoma.
Retail gasoline prices continue to rise with the rally in oil prices and the refining capacity that is still getting back on its feet. The current retail average is the highest since Memorial Day weekend 2019.
Total petrochemical production is on track to begin approaching normal around mid-March, though some units will take longer. Nitrogen remains a limitation to an efficient startup with some facilities having to prioritize restarts based on limited supply. The overall nitrogen supply infrastructure does not appear to have been designed to handle the extraordinary event of starting up most of the Texas plants at the same time. This week should see significant progress in restarting production capacity.