Texas Freeze helps rival oil exporters such as Saudi Arabia OPEC members

The shocking Texas winter storm that left millions without power and killed dozens of lives also froze an important local commodity – Lone Star State’s oil production, reducing approximately 4 million barrels per day of US production.

The result is an increase in revenues and possibly increased exports between rival oil-producing countries, commodity experts say.

Analysts estimate that the total volume of oil lost due to the production shutdown in Texas is somewhere between 18 million and 40 million barrels and that about a fifth of US refining capacity has been shut down. And while temperatures are rising again and production is expected to be largely At the end of this week, the impact of the deficit on the oil markets will already be visible in the recent rise in crude oil prices.

International benchmark Brent crude is up more than $ 6 a barrel since the storm hit Texas manufacturing facilities in mid-February. The US benchmark West Texas Intermediate is up about $ 3 a barrel.

The development, while another blow to Texas on top of the devastating damage and human suffering caused by the one-time storm, is translating in the global marketplace into a likely boon for other oil producers, such as those in the Middle. East.

“The Texas storm is greatly helping Saudi and its partners as it accelerates the path to inventory normalization,” said Peter Sutherland, president of Henrietta Resources LLC, the Houston-based energy investment company.

“Simultaneous purchase of both raw and refined products is a big tailwind on the way to spring,” he told CNBC. “It’s not just positive sentiment, the roughly 40 million barrels lost in the storm are helping to tighten the market.”

Stocktaking continues a trend of oil prices rising steadily from their historic pandemic lows nearly a year ago. Brent crude is up 30% so far, with Goldman Sachs predicting it could reach $ 75 by the end of this year, a level not seen since the fall of 2018.

This could affect decision-making among OPEC members at their upcoming meeting on March 4. While the organization had prioritized production cuts to keep oil prices under control throughout much of the pandemic, the more promising outlook for demand – and a gradual normalization of global supply – provides incentives for these producers to accelerate the pace at which they will increase their production.

“I would certainly expect Saudi Arabia to boost production given the current prices the market has seen,” said Yousef Alshammari, CEO of oil markets consultancy CMarkets.

“Supply disruption to Texas could cause OPEC + and Saudi Arabia to increase production to some extent, and much of that increase in production will go to exports at higher prices.” OPEC + is the loose alliance of 13 OPEC states and 10 non-OPEC oil producing countries.

Saudi Arabia’s voluntary production cut of 1 million barrels per day will end in March and is expected to start gradually reducing supplies as early as April. But that also means that the kingdom cannot take advantage of higher crude oil prices by ramping up exports until the period of production contraction is over.

Still, “every oil producer, including Saudi Arabia, is benefiting from” the price hike, said Tamas Varga, senior analyst at PVM Oil Associates. “US crude oil exports will decline in the coming weeks and this provides support for international grades – again beneficial for oil producers.”

Some analysts don’t see the Texas output loss as a consequence, even in the medium term.

The impact of a daily loss of 4 million barrels “is very small worldwide, as the world produces more than 80 million barrels of oil per day,” Rene Santos, North American supplies manager at S&P Global Platts Analytics told CNBC.

“Freeze-offs happen every year in the US, but of the magnitude we have seen in recent days, is not common,” he said. “Moreover, freezes are short-lived.”

PVM’s Varga agrees. “The situation is likely to normalize quickly and in the medium term the impact of the Texas freeze will be negligible,” he said.

But longer-term market dynamics are still in favor of OPEC members – not because of the Texas storm, but thanks to the devastating shutdowns in US oil production last year when crude oil prices crashed. Due to the high cost of shale production in the US, most producers were unable to survive the effects of the lockdowns. The number of drills in the US is still 50% below its 2019 level, despite rising prices.

“US oil production is not expected to recover to its 2019 levels, which will make OPEC + much more impact on markets in 2021,” said Alshammari.

In the long run, the impact of a weather shock like this month’s “really depends on how Texas will deal with such crises going forward,” he added. “I expect them to be more resilient to such adverse weather conditions on the upstream supply side, but I certainly expect Saudi Arabia to have a larger market share in the long run due to lost market share from shale production.”