Pump plugs operate in front of a drilling rig in an oil field in Midland, Texas.
Nick Oxford | Reuters
Energy prices rose on Tuesday as a period of cold in the south increased fuel demand, while simultaneously impeding production.
More than 3.8 million people were left without power in Texas on Tuesday morning, according to poweroutage.us, as the power grid could not keep up with rising demand, forcing utilities to implement continuous outages in some cases.
“Most heating needs are met through the electric baseboard of heat pumps in the southern region,” said John Kilduff, a founding partner at Again Capital. “Electricity demand over the weekend rivaled peak summer heat levels.”
In the long run, Henry Hub natural gas rose 6.7% to trade at $ 3,106 per million British thermal units. In the long run, gasoline advanced by more than 4%.
“The storm that paralyzed the Midwest and Northeast was much worse than expected,” said Jeff Kilburg, CEO of KKM Financial. “Frigid temperatures and speculators that have reached short-term prices are dramatically raising futures prices.”
The storm destroyed about 30 gigawatts of production capacity, according to estimates by ClearView Energy Partners, just as consumers increased demand to heat their homes. In the end, there was simply not enough supply, which forced electricity companies to turn to the open market to buy electricity.
“The weather is severe enough to reduce supply when demand is close to all-time highs. Certain regional spot prices of natural gas have risen 10 to 100 times in a few days,” analysts said. RBC.
West Texas Intermediate’s crude futures, the US oil indicator, topped $ 60 for the first time in more than a year on Monday, although on Tuesday morning the contract traded shyly against that level. Brent crude oil, the international oil benchmark, fell 21 cents to $ 63.09 a barrel.
Generating units of all types of fuel have been forced offline – including wind production – and pipeline freezes impede the flow of natural gas and crude oil. Texas is the largest producer of crude oil and gas in the United States and has 30 refineries, according to data provided by the US Energy Information Administration.
Andy Lipow, president of Texas-based Lipow Oil Associates, said that of the 2.6 million people in Texas without electricity on Monday, only 70,000 were affected by power lines or felled trees. He estimates that one million barrels per day of crude oil production has been eliminated offline, about 40% to 50% of natural gas production in the Permian Basin has been shut down, and about 50% of wind energy production has fallen due to blades. ice creams .
The energy sector gained more than 2% during premarket trading on Tuesday. Occidental Petroleum rose 6% in premarket trading, while Exxon, Devon Energy, Halliburton and ConocoPhillips rose more than 2%.
On Sunday, President Joe Biden declared a state of emergency in Texas, while the storm brought snow and ice from Arkansas to Indiana. The storm is expected to travel from the Ohio Valley through Pennsylvania to Maine, according to the National Weather Service.