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Oil Drops as Investors Gauge Big Chill Impact on U.S. Refineries

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Oil prices slid by up to 2 in early trade on Friday, adding to overnight declines, on worries that refineries will take time to resume operations after the big freeze in the U.S. South, creating a gap in demand, while OPEC supplies were expected to rise.

The market was ripe for a correction and signs of the power and overall energy situation starting to normalise in Texas provided the necessary trigger, said Vandana Hari, energy analyst at Vanda Insights.

U.S. West Texas Intermediate WTI crude futures fell 1.14, or 1.9, to 59.38 a barrel at 0421 GMT, after declining 1 on Thursday.

Brent crude futures dropped 1.03, or 1.6, to 62.90 a barrel, after declining 0.6 on Thursday.

Both benchmark contracts rallied to 13month highs on Thursday driven by the historic freeze in U.S. southern states. While analysts estimate the extreme cold has shut in as much as onethird of U.S. crude production, attention has now turned to the impact on refiners.

The lack of demand from Texan refiners will likely lead to builds in crude stocks over coming weeks, even though around 3.5 million barrels per day bpd of U.S. oil output has been shut, ANZ Research said in a note.

Citi analysts said in a note that some U.S. refineries might bring forward about 500,000 bpd of maintenance work normally scheduled for the spring over next month, ahead of the summer driving season.

The frontmonth WTI price curve dipped into a shallow contango as low as minus 4 cents on Friday, a market structure in…

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