Pedestrians walk on an icy road in East Austin, Texas on February 15, 2021. The winter storm Uri brought historic cold weather to Texas, causing traffic delays and power outages, and storms swept across 26 states with a mixture of icy temperatures and precipitation.
Montinique Monroe | Getty Images
Energy prices rose on Tuesday when a deep freeze in the South increased demand for fuel and hampered production.
According to poweroutage.us, there were more than four million people in Texas without power on Tuesday morning because the power grid could not keep up with the increased demand, which in some cases forced themselves to implement power outages.
“Most of the heating needs are supplied by electric plinths or heat pumps in the southern region,” said John Kilduff, founding partner of Again Capital. “Demand for electricity matched the summer’s heatwave levels over the weekend.”
Henry Hub natural gas futures rose 6.7% to trade at $ 3,106 per million UK thermal units. Petrol futures have risen by more than 4%.
“The storm that paralyzed the Middle East and Northeast was much worse than expected,” said Jeff Kilburg, CEO of KKM Financial. “Fixed temps and short-term speculators raise futures prices dramatically higher.”
According to estimates by ClearView Energy Partners, the storm eliminated about 30 gigawatts of generating capacity just as consumers heated up demand for homes. In the end, there was just not enough supply, which forced power companies to go to the open market to buy electricity.
“The weather is bad enough to limit supply when demand is near overall high levels,” RBC analysts said in a note. “Certain regional spot prices for natural gas have risen ten to 100 times in a matter of days.”
West Texas Intermediate crude futures, the U.S. oil benchmark, broke above $ 60 for the first time in more than a year on Monday, although the contract was shy on Tuesday morning. Brent crude, the international oil benchmark, slipped 21 cents to $ 63.09 a barrel.
Production units for different fuels were forced offline – including wind production – and freezing pipes led the flow of natural gas and crude oil. Texas is the largest producer of crude oil and natural gas in the United States and has 30 refineries, according to data from the U.S. Energy Information Administration.
Andy Lipow, president of Lipow Oil Associates, which is based in Texas, said that of the 2.6 million people in Texas who were without power on Monday, only 70,000 were affected by power outages or trees. He estimates that one million barrels per day of crude oil production is taken offline, about 40% to 50% of the natural gas production in the Perm basin is closed, and about 50% of the wind power production is lower due to frozen blades. .
The energy sector rose by more than 2% on Tuesday with pre-trading. Occidental Petroleum rose 6% in pre-trading, while Exxon, Devon Energy, Halliburton and ConocoPhillips rose more than 2%.
President Joe Biden declared a state of emergency in Texas on Sunday when the storm brought snow and ice from Arkansas to Indiana. According to the National Weather Service, the storm will move in from Ohio Valley through Pennsylvania and Maine.