Pump jacks will be operating in the Permian Basin in Midland, Texas, USA on Saturday, February 13, 2021.

Matthew Busch | Bloomberg | Getty Images

The shocking Texas winter storm, which left millions of people without electricity and killed dozens of lives, also frozen an important local commodity: Lone Star State oil production, which cut around 4 million barrels of US production every day.

According to raw material experts, the result will be an increase in revenues and potentially higher exports among the competing oil-producing countries.

Analysts estimate that the total amount of oil lost to the Texas production freeze is between 18 and 40 million barrels, and about a fifth of US refining capacity has been closed. And while temperatures are rising again and production is expected to recover for the most part later this week, the impact of the deficit on oil markets is already evident in the recent surge in crude oil prices.

The international benchmark for Brent crude has risen 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 per barrel.

The development that deals another blow to Texas, in addition to the devastating damage and human suffering caused by the storm in a decade, leads to a likely boon in the world market for other oil producers like those in the Middle East.

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

“The simultaneous purchase of crude oil and refined products is a big tailwind in the spring,” he told CNBC. “It’s not just a positive mood. The 40 million barrels lost in the storm are helping to tighten the market.”

OPEC expects an increase in production

The depletion of inventories continues a trend in which oil prices rise steadily from their historic pandemic lows almost a year ago. Brent crude is up 30% since the start of the year. Goldman Sachs predicts it could hit $ 75 by the end of this year, a level not seen since fall 2018.

This could affect decision-making among OPEC members at their upcoming March 4th meeting. While the organization had prioritized production cuts during much of the pandemic to stay below oil prices, the more promising outlook for demand – and the gradual normalization of global supply – provides an incentive for these producers to accelerate the pace at which they produce their production will increase.

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

“A disruption to supplies in Texas can cause OPEC + and Saudi Arabia to increase production to some extent, and much of that increase is used for 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 cuts of 1 million barrels a day will end in March and are expected to gradually resume supplies as early as April. But that also means that the kingdom cannot take advantage of higher crude oil prices by increasing exports until this production cut period ends.

“Every oil producer, including Saudi Arabia, will benefit from the price increase,” said Tamas Varga, senior analyst at PVM Oil Associates. “US crude oil exports will decline in the coming weeks and this supports international qualities – again supportive for oil producers.”

“Very small worldwide”

Some analysts do not see the production loss in Texas as a consequence in the medium term either.

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

“Freezing happens every year in the US, but of the magnitude we’ve seen in the past few days, it doesn’t happen very often,” he said. “Plus, freezes are short-lived.”

Varga from PVM agrees. “The situation is likely to normalize soon and in the medium term the effects of the freezing in Texas will be negligible, I think,” he said.

However, longer-term market momentum continues to benefit OPEC members – not because of the storm in Texas, but thanks to the devastating oil production shutdown in the US last year when crude oil prices collapsed. The high cost of US shale production meant that most producers could not survive the effects of the lockdowns. The number of US drilling rigs is still 50% below the 2019 level despite rising prices.

“US oil production is not expected to recover to 2019 levels, which means that OPEC + will have a much greater impact on the markets in 2021,” Alshammari said.

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