Storm cuts U.S. oil, gas, power output, sending prices higher

Dec 23 (Reuters) – Cold and gusty winds cut power and energy production across the United States on Friday, pushing up heating and electricity prices as people prepared to celebrate the holidays.

Winter Storm Elliott brought sub-freezing temperatures and extreme weather warnings to nearly two-thirds of the United States, with cold and snow extending into the Christmas holiday in some areas.

More than 1.5 million homes and businesses lost power, oil refineries in Texas cut gasoline and diesel production over equipment failures, and the damage caused heating and power prices to rise. Oil and gas production from North Dakota to Texas suffered freeze-ins, reducing supplies.

About 1.5 million barrels of daily refining capacity on the US Gulf Coast were shut down due to bitterly cold temperatures. The production loss is not expected to last, but it has boosted fuel prices.

TotalEnergies ( TTEF.PA ), Motiva Enterprises ( MOTIV.UL ) and Marathon Petroleum ( MPC.N ) exited facilities outside Houston. Cold weather also disrupted Exxon Mobil ( XOM.N ), LyondellBasell ( LYB.N ) and Valero Energy ( VLO.N ) plants in Texas that produce gasoline, diesel and jet fuel.

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Sempra Infrastructure’s Cameron LNG plant in Louisiana said the weather was disrupting its liquefied natural gas production, without giving details. Crews at the 12 million tonne-per-year facility were trying to restore output, it said.

Freeze-ins — in which ice crystals stop oil and gas production — have cut production at North Dakota oilfields this week by 300,000 to 350,000 barrels a day, or about a third of normal. El Paso natural gas operator Kinder Morgan Inc. ( KMI.N ) said that in a Permian oilfield in Texas, more gas was withdrawn than injected due to a freeze.

U.S. benchmark oil prices rose 2.4% to $79.56 on Friday, and gas in West Texas rose 22% the next day to nearly $9 per million British thermal units, the highest since the state’s 2021 deep freeze.

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Power prices on the Texas grid also rose to $3,700 per megawatt hour, prompting generators to add more power to the grid before prices fell back as thermal and solar supplies came online.

A New England bulk power supplier said it expected to have more than enough demand to supply, but elsewhere strong winds caused outages mostly in the Southeast and Midwest; More than 187,000 were counted without power in North Carolina.

“Crews are restoring power but high winds are making repairs challenging at most of the 4,600 outage locations,” Duke Energy spokesman Jeff Brooks wrote on Twitter.

Heating oil and natural gas futures rose sharply in response to the cold snap. US heating oil futures rose 4.3% while natural gas futures gained 2.5%.

In New England, gas rose 361% to an 11-month high of $30 mmBtu on Friday at the Algonquin hub.

About half of the power generated in New England comes from gas-fired plants, but on the coldest days, power generators shift to burning more oil. Power companies’ generation mix from oil-fired plants was 17% as of midday Friday, according to grid operator New England ISO.

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Gas production fell nearly 6.5 billion cubic feet per day (bcfd) over the past four days to an early nine-month low of 92.4 bcfd on Friday as wells froze in Texas, Oklahoma, North Dakota, Pennsylvania and elsewhere.

That’s the biggest drop in output since February 2021, when Texas overturned a freeze for millions of people.

One billion cubic feet of gas is enough to supply about 5 million US homes for a day.

Reporting by Erwin Seba and Scott DiSavino; Additional reporting by Arathi Somesekhar and Laila Kearney; Editing by Jonathan Otis, Kirsten Donovan, Aurora Ellis, and Leslie Adler

Our Standards: The Thomson Reuters Trust Principles.

Scott DiSavino

Thomson Reuters

Covers the North American power and natural gas markets.


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