Storm cuts US oil, gas, power production, sending prices higher

Dec 23 (Reuters) – Briskly cold and blustery winds on Friday knocked out power and cut energy production across the United States, driving up heating and electricity prices as people prepared for holiday celebrations.

Winter Storm Elliott brought sub-freezing temperatures and extreme weather warnings to about two-thirds of the US, with cold and snow in some areas to last through the Christmas holiday.

More than 1.5 million homes and businesses lost power, oil refineries in Texas cut gasoline and diesel production due to equipment failure, and heat and power prices rose with the losses. Oil and gas production from North Dakota to Texas was subject to a freeze, cutting supplies.

About 1.5 million barrels per day of refining capacity along the US Gulf Coast were shut down due to the bitterly cold temperatures. The production losses are not expected to last, but they have lifted fuel prices.

Outdated were TotalEnergies (TTEF.PA), Motiva Enterprises (MOTIV.UL) and Marathon Petroleum (MPC.N) facilities outside Houston.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.

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

Freeze-ins — where ice crystals halt oil and gas production — this week trimmed output in North Dakota’s oil fields by 300,000 to 350,000 barrels per day, or a third of normal. In Texas’ Permian oil fields, the freeze caused more gas to be withdrawn than injected, El Paso natural gas operator Kinder Morgan Inc. ( KMI.N ) said.

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

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

New England’s bulk power supplier said it expected to have enough to meet demand, but elsewhere strong winds caused outages mainly in the Southeast and Midwest; North Carolina counted more than 187,000 without power.

“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.

Futures for heating oil and natural gas rose sharply in response to the cold. Fuel oil futures in the US rose by 4.3%, while natural gas futures rose by 2.5%.

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

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

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

It’s the biggest drop in production since the February 2021 freeze knocked out power for millions in Texas.

One billion cubic feet is enough gas to supply about 5 million American homes for one day.

Reporting by Erwin Seba and Scott DiSavino; additional reporting by Arathy Somasekhar and Laila Kearney; editing by Jonathan Oatis, Kirsten Donovan, Aurora Ellis and Leslie Adler

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