February 4, 2023

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A driver makes their way through a flooded street at high tide during a winter storm in Gloucester

The storm is cutting oil, gas and electricity production in the U.S., driving up prices

Winter Storm Elliott brought freezing temperatures and extreme weather warnings to two-thirds of the United States, with cold and snowy conditions lasting through the Christmas holiday in some areas.

More than 1.5 million homes and businesses lost power, oil refineries in Texas shut down gasoline and diesel production due to equipment failure, and losses caused heating and power costs to rise. Oil and gas production from North Dakota to Texas was affected by the shutdown, reducing supplies.

Roughly 1 million barrels of daily refining capacity off the US Gulf Coast were shut down due to bitterly cold temperatures. Factories affected include the Motiva Enterprises complex in Port Arthur, Texas, which can process more than 600,000 barrels of oil per day, making it the largest refinery in the United States.

Sempra Infrastructure’s Cameron LNG plant in Louisiana said the weather had disrupted production of liquefied natural gas, without giving details. Workers at the 12-million-tonne-a-year plant are trying to restore production, the company said.

Ice caps shut down oil and gas production – This week production at North Dakota’s oil fields was reduced by 300,000 to 350,000 barrels a day, or about a third of normal. In a Permian oil field in Texas, freezing has led to more gas being extracted than injected, El Paso natural gas operator Kinder Morgan Inc.

U.S. benchmark oil rose 2.5% to $79.46 on Friday, while West Texas gas futures jumped 22% the next day to $9 a million British thermal units, the highest level since the state’s deep freeze in 2021. Texas grid electricity prices also rose. At $3,700 per megawatt-hour (MWh), generators were forced to add more power to the grid before prices fell to about $58 MWh as thermal and solar supplies came online.

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New England’s total electricity supply is expected to be sufficient to meet demand, but strong winds have caused outages elsewhere, mainly in the Southeast and Midwest; More than 187,000 people were without power in North Carolina.

“Crews are restoring power, but high winds are making repairs difficult at 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. U.S. heating oil futures rose 4.1%, while natural gas futures rose 1.7%.

In New England, gas silver in the Algonquin core rose 361% to a near 11-month high of $30 mmBtu.

About half of the electricity generated in New England comes from gas plants, but on colder days, power producers switch to burning more oil. As of Friday afternoon, 17% of the electric utility’s generation mix came from oil-fired plants, according to grid operator New England ISO.

Gas production has fallen by about 6.5 billion cubic feet per day (bcfd) over the past four days to 92.4 bcfd on Friday as wells in Texas, Oklahoma, North Dakota, Pennsylvania and elsewhere froze.

It was the biggest drop in production since the February 2021 snowstorm knocked out power to millions of people in Texas.

One billion cubic feet of gas is enough to power about 5 million American homes per day.