Oil giving up big-freeze gains with wells slowly restarting

Oil fell for a second day as production slowly restarted in Texas and the White House said it would be willing to meet with Iran, potentially paving the way for more crude exports from the Persian Gulf nation.

Futures in New York dropped toward $59 a barrel, falling the most in three months at one point on Friday. Companies are using restored power from grids or generators to resume output that was halted by the frigid weather, according to people familiar with the matter. The timeline for a full restoration of the estimated 40% or so of U.S. oil production that was shut in by the big freeze is unclear.

Fuel margins rocketed again on Friday, however, with four of the biggest plants in Texas facing delays of several weeks or more to resume operations. While that potentially limits demand for crude, it also raises the potential for prolonged fuel shortages that could spread across the U.S.

Elsewhere, the White House said it would be willing to meet with Tehran to discuss a “diplomatic way forward” in efforts to return to the nuclear deal that the U.S. quit in 2018, adding further pressure to prices.

Oil is still up more than 20% this year due to Saudi Arabian output cuts and an improving demand outlook. Technical indicators had been showing that crude was due for a pullback, with 14-day Relative Strength Indexes for both the U.S. and global oil benchmarks above 70 in a sign the commodity is overbought.

“Though output is likely to be ramped up fairly quickly again, the focus now appears to have shifted more to refineries, which may take longer to resume their production,” said Carsten Fritsch, analyst at Commmerzbank AG.

Prices

• West Texas Intermediate fell 1.5% to $59.61 a barrel as of 10:20 a.m. in London
• Brent for April settlement dropped 1.1% to $63.25

There should be only a small and transitory impact on global oil prices from the U.S. freeze as the supply and demand impacts balance out, Goldman Sachs Group Inc. said.

The cold snap and power cuts affected more than 20 refineries in Texas, Louisiana and Oklahoma. Crude-processing capacity fell by about 5.5 million barrels a day, said Amrita Sen, chief oil analyst for Energy Aspects Ltd.

Other oil-market news

• The dollar dipped, while factory output in the euro area’s two largest economies proved resilient.
• Mexico is revamping its massive sovereign oil hedge, copying some of the tactics that U.S. shale producers use in an effort to keep its presence in the market under the radar and secure better prices.
• Europe’s moribund diesel market is finally showing signs of tightening as the coldest weather in parts of the U.S. in years sees traders snapping up tankers to export the fuel across the Atlantic.