Pump jacks work for an oil rig in an oil field in Midland, Texas.
Nick Oxford | Reuters
Energy prices rose on Tuesday as a result of a cold snap in the south, which hampered both fuel demand and production.
According to poweroutage.us, more than 3.8 million people across Texas were without power on Tuesday morning as the power grid couldn’t keep up with increased demand, forcing utility companies to implement ongoing power outages in some cases.
“Most of the heating needs are met through the electric baseboard of heat pumps in the Southern region,” said John Kilduff, founder of Again Capital. “Electricity demand, over the weekend, rivaled the peak heat waves in the summer.”
Henry Hub natural gas futures were up 6.7% to trade at $ 3,106 per million British thermal units. Gasoline futures increased by more than 4%.
“The storm that paralyzed the Midwest and Northeast was much worse than expected,” said Jeff Kilburg, CEO at KKM Financial. “Frosty temps and inadequate speculators are dramatically increasing futures prices.”
The storm hit about 30 gigawatts of generating capacity, according to ClearView Energy Partners estimates, just as consumers pushed up demand to heat their homes. In the end, there just wasn’t enough supply, forcing energy companies to go to the open market to buy electricity.
“The weather is fierce enough to limit supply when demand is almost always high. Certain regional spot prices for natural gas have increased 10- to 100-fold in a matter of days,” RBC analysts said.
West Texas Intermediate crude oil futures, the US oil benchmark, broke above $ 60 for the first time in more than a year on Monday, although the contract traded below that level Tuesday morning. Brent crude, the international oil benchmark, fell 21 cents to $ 63.09 a barrel.
The generation of units with different types of fuel has been forced to go offline – including some of the wind production – and the freezing of pipelines impedes the flow of natural gas and crude oil. Texas is the largest producer of crude oil and natural gas in the US and has 30 refineries, according to data from the US Energy Information Administration.
Andy Lipow, president of Texas-based Lipow Oil Associates, said of the 2.6 million people in Texas who had no power Monday, only 70,000 people were affected by downed power lines or trees. He estimates that a million barrels a day of crude oil production has been taken offline, about 40% to 50% of natural gas production in the Perm basin has been shut down, and about 50% of wind power production has been shut down due to frozen blades. .
The energy sector gained more than 2% on Tuesday in premarket trading. Occidental Petroleum was up 6% in premarket trading, while Exxon, Devon Energy, Halliburton and ConocoPhillips were all up more than 2%.
On Sunday, President Joe Biden declared a state of emergency in Texas when the storm brought snow and ice from Arkansas to Indiana. According to the National Weather Service, the storm is expected to move from the Ohio Valley through Pennsylvania to Maine.