Genscape’s Midland-Basin Storage Report says Permian production started 2015 on a weak note, curtailed by freeze-offs caused by below freezing temperatures.
Producers and marketers scrambled to meet sales quotas with the decreasing oil production volumes by drawing from storage in the basin.
Production in the basin for the week ending 3 January averaged lower by approximately 460 mbpd, for a total of approximately 2.3 mnbbls impacted by the freeze-offs. During the same week, withdrawals from storage totaled 2.1 mnbbls, a 26 percent decrease in stocks over the previous week, as producers strained to make up for the lost production volumes. Midland storage saw the biggest change in volumes with a draw of 1.3 mnbbls, a 34 percent drawdown in inventories.
The spot differential for West Texas Intermediate at Midland, TX, has strengthened nearly US$2/bbl versus WTI-Cushing between 30 December 2014 and 5 January 2015. On 30 December, the price was reported at WTI-Cushing near minus $4.34/bbl and on 5 January, it was reported at WTI-Cushing minus $2.50/bbl. On 6 January, the differential weakened to WTI minus $3.30/bbl.