The pump dams operate in front of a drilling rig at an oil field in Midland, Texas.
Nick Oxford | Reuters
Energy prices jumped on Tuesday as a period of cold in the south increased fuel demand and at the same time hampered production.
More than 3.8 million people were left without electricity in Texas on Tuesday morning, according to poweroutage.us, as the power grid could not keep up with increased demand, forcing utilities to implement continuous shutdowns.
“Most heating needs are met through the electric socket of heat pumps in the southern region,” said John Kilduff, founding partner of Again Capital. “Electricity demand, over the weekend, rivaled peak summer heatwave levels.”
Henry Hub natural gas futures jumped 6.7% to trade at $ 3,106 per million British thermal units. Gasoline futures advanced more than 4%.
“The storm that has paralyzed the Midwest and Northeast was much worse than expected,” said Jeff Kilburg, CEO of KKM Financial. “Cold weather and stopped speculators are drastically raising futures prices.”
According to estimates by ClearView Energy Partners, the storm destroyed about 30 gigawatts of generation capacity, just as consumers increased demand to heat their homes. Ultimately, there was not enough supply, forcing power companies to turn to the open market to buy electricity.
“The weather is severe enough to reduce supply when demand is almost at its highest levels of all time. Some regional natural gas prices have risen 10 to 100 times in a matter of days,” RBC analysts noted. .
West Texas crude futures, the U.S. oil benchmark, topped $ 60 for the first time in more than a year on Monday, although the contract was trading at that level on Tuesday morning. Brent crude, the international benchmark for oil, fell 21 cents to $ 63.09 a barrel.
Generating units of various types of fuel have been forced offline (including wind production) and pipeline freezes are implementing the flow of natural and crude gas. Texas is the largest producer of crude oil and natural gas in the U.S. and has 30 refineries, according to data from the U.S. Energy Information Administration.
“The new outages will reduce the supply of refined fuels, as they have exceeded 3 million barrels of capacity,” said Paola Rodriguez Masiu, vice president of Rystad Energy’s oil markets.
“About 2.5 million bpd of capacity was closed between Houston and Louisiana, including the 600,000 bpd Motiva Enterprises facility,” he added, referring to the daily barrel measurement.
The energy sector gained more than 2% during pre-market trading on Tuesday. Western Petroleum rose 6% in premarket trade, while Exxon, Devon Energy, Halliburton and ConocoPhillips rose more than 2%.
On Sunday, President Joe Biden declared a state of emergency in Texas as 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.