Cold causes 1 million barrel a day drop in Permian production

 

Arctic-like temperatures not only left wind turbines frozen in West Texas, but it resulted in a one million barrel-a-day reduction in oil production in the Permian Basin. It also sent oil prices up.

Temperatures plunged to minus-one degree in Midland where the reading was the lowest since 1899. As a result, oil production plunged too and oil traders and company executives put the estimate on Monday at a million barrels a day.

What caused the drop in production? A combination of things brought on by the snow and cold weather. In some cases, wells were shutdowns and flow-line outages happened. In others, trucks used by small Permian producers to pick up the crude every few days couldn’t make it down snow-covered roads. As a result, companies were forced to temporarily close the wells.

Why doesn’t the same kind of cold and snowy weather affect production in Colorado, Wyoming and North Dakota? The oil production kits used in Texas are not built to withstand the low temperatures compared to kits used in the northern plains. Flow lines linking individual wells to gathering centers are also buried in the northern plains but not in Texas and New Mexico.

 

However rising temperatures on Tuesday and Wednesday will make the hit short lived. One oil consultant described the loss of U.S. production as a result of the extreme cold wave as “substantial.”

But, the million barrel-a-day hit also caused a jump in oil prices as West Texas Intermediate crude rose above $60 a barrel for the first time in more than one year.

The estimated loss in the Permian Basin covers not just West Texas but southeast New Mexico. It is a region with average daily production of 5.8 million barrels which is nearly one-half of the total crude output in the U.S.