Factbox: Power, gas and petroleum prices continue rally on Texas outages

New York — US power, gas and petroleum prices rallied Feb. 16 after frigid temperatures caused rolling blackouts in Texas. Widespread power outages hammered utility customers and oil refinery operations, while gas prices reached heights not seen in decades.

As of late afternoon Feb. 16, nearly 4.7 million utility customer accounts were without power across the US, with just over 3.8 million of those in Texas, according to poweroutage.us, which aggregates US utility outage data.

As a result, the US Federal Energy Regulatory Commission and North American Electric Reliability Corp. said Feb. 16 that they would open a joint inquiry into the bulk power system's operations during the extreme winter weather conditions battering the Midwest and South-Central states.

The power outages caused several Texas refineries to shut down or reduce operations. Out of roughly 5.9 million b/d of Texas refining capacity, at least 2.6 million b/d was confirmed to be shutting down entirely. The impact to refining operations is likely to be higher, with several plants reporting reduced operations and flaring.

Frigid temperatures also reduced crude and natural gas output. However, most of the projected 3 million-4 million b/d of downed US oil production could be restored by the weekend, S&P Global Platts Analytics estimated.

"Operators in the Permian are already reporting the restoration of power, [which] has allowed telecom and utility services at the wellhead to ramp up production and gas processing facilities to come back online," said Jason Modglin, president of the Texas Alliance of Energy Producers. "This production will be critical to resupplying midstream and retail gas suppliers who are drawing on storage reserves to meet customer and electric utility demands."

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• US FERC, NERC to launch inquiry into extreme winter weather power outages

The natural gas market rally was largely contained to undersupplied hubs in the coldest regions. At the Henry Hub, prices hit their highest in 18 years at nearly $17 but remained well below nearby locations in East Texas.

Along with Louisiana and the Southeast, hubs dotting the Northeastern Seaboard remained largely insulated from the historic price action, with Transco Zone 6 NY and Boston's Algonquin city-gates ending the trading day at $15.04 and $11.54/MMBtu, respectively.

According to the US National Weather Service, another winter front is expected to bring freezing temperatures to Southeast Texas, which is expected to last through Feb. 17.

"Record-low temperatures are possible," said the Feb. 16 report, as midday temperatures in Houston hovered around 24 degrees F, up from the 12 degrees F earlier in the day.

PRICES

Oil

• NYMEX front-month crude settled at $60.05/b, up 58 cents, while ICE front-month Brent settled 5 cents higher at $63.35/b.
• In refined products, NYMEX front-month ULSD settled 4.30 cents higher at $1.8144/gal, and front-month RBOB settled 8.04 cents higher at $1.7729/gal.
• The front-month ICE ULSD crack against Brent closed around $12.25/b, down slightly from $12.32/b Feb. 15, and up from $11.69/b Feb. 12.
• The front-month ICE RBOB crack closed around $14.97/b, up from $14.53/b Feb. 15 and $13.75/b Feb. 12.
• Trans-Atlantic clean shipping rates have jumped over the past two days, as higher US Atlantic Coast products prices have widened an import arbitrage.
• S&P Global Platts assessed the UK Continent to USAC medium range clean rate at Worldscale 155 Feb. 16, up from w125 Feb. 15 and w117.50 Feb. 12.
• US Gulf Coast CBOB on the last day of trading for Colonial Pipeline's 12th cycle was assessed at NYMEX March RBOB minus 4.25 cents/gal, up 2.15 cents from the prior trading day.
• USGC ULSD was assessed at NYMEX April ULSD minus 3.15 cents/gal, up 2.25 cents/gal.
• The USGC jet market increased 4.25 cents/gal to April futures minus 14 cents/gal.

Gas

• In East Texas, gas prices at Houston Ship Channel were assessed at $400/MMBtu and at the nearby Katy Hub at over $350/MMBtu, preliminary settlement data from S&P Global Platts showed.
• At hubs across Kansas, Oklahoma and eastern Arkansas, spot gas prices traded into the $300 to $400/MMBtu range. ONEOK Gas Transportation was a notable outlier, with cash prices there settling at over $900/MMBtu.

Power

• At the direction of the Public Utility commission of Texas, the Electric Reliability Council of Texas pegged locational marginal prices at or near the systemwide offer cap of $9,000/MWh all day Feb. 16, after noting that it was inappropriate for prices to have fallen as low as $1,200/MWh Feb. 15 during periods of rolling blackouts.
• South Hub on-peak day-ahead locational marginal prices reached $3,360.72/MWh and North Hub on-peak day-ahead LMP reached $3,202.59/MWh on Feb. 15, both record highs.
• In comparison, month-to-date prices averaged in the $50s/MWh before Feb. 15.

TRADE FLOWS

Oil

• Extended refinery outages were widening the import arbitrage into the US Atlantic Coast, which relies heavily on refined products from Gulf refineries and waterborne imports.
• Roughly 5.03 million barrels of gasoline, and 2.55 million barrels of diesel, is heading to the US in the week beginning Feb. 22, according to Kpler ship tracking data, with the bulk of that heading to the USAC.
• Any extended refinery outages would likely impact refined products exports, as would the closure of export terminals.
• USGC refiners exported 4.24 million b/d of refined products in November, according to the most recent US Energy Information Administration monthly data, primarily to Latin America, with 1.13 million b/d alone going to Mexico.
• Mexico will boost residual fuel and diesel usage for power generation, as it was unable to import around one of the four billion cubic feet of natural gas that the country sources from the US daily.

Gas

• A drop in production prompted shippers across the US to reign in gas exports and ramp up imports.
• At US LNG terminals, gas deliveries plunged to just 5.5 Bcf/d over the weekend, down from over 10 Bcf/d in the week prior.
• Pipeline exports to Mexico fell about 1.4 Bcf/d as shippers across Texas moved to keep much-needed supply in-state.
• Gas imports from Canada surged to their highest in over three years at 7.4 Bcf/d, while LNG imports climbed to 1.7 Bcf/d.

Power

• Southwest Power Pool forecast peakload around 45.983 MW Feb. 16, which would break the Feb. 15 record of 43.661 MW. Peakoad was forecast to ease after that to around 42.267 GW Feb. 17, 41.94 GW Feb. 18 and 41.494 GW Feb. 19.
• Southwest Power Pool began calling on utilities in its balancing authority area to implement rolling blackouts around noon CT Feb. 15 to avoid an uncontrolled blackout that could result from demand exceeding supply due to extreme winter conditions.

INFRASTRUCTURE

Oil/petrochemicals

• About 2.6 million b/d of refinery capacity is confirmed shut and a total of 4.8 million b/d of operable refinery capacity reported impacted by subfreezing temperatures, spanning from Corpus Christi in the southwest to the Louisiana border.
• Most of the Houston-area refineries reported some impact, including Shell's jointly-owned Deer Park refinery and petrochemical plant.
• Most of the projected 3 million-4 million b/d of downed US crude oil production, which went offline after power failed and wellheads froze Feb. 14-15, could be restored by the weekend, S&P Global Platts Analytics estimated Feb. 16.
• The offline production estimate represented a peak on Feb. 15, although restoration of power and production has already begun.
• Enbridge said its 585,000 b/d Flanagan South pipeline (Line 59) was returned to service Feb. 15 after briefly losing power. The pipeline delivers crude from Flanagan, Illinois to Cushing, Oklahoma, the delivery and pricing hub for NYMEX crude futures.
• The Houston Pilots, which oversee vessel traffic in and out of the ship channel, said traffic would remain suspended on expectations that roadways would become hazardous.

Gas

• The US has lost nearly 11 Bcf/d in natural gas supply over the past week, with total production estimated Feb. 16 at just 79.1 Bcf/d, making for the largest weekly decline in output since Hurricane Ike crashed into the US Gulf Coast in September 2008.
• Kinder Morgan's 70,000-mile Natural Gas Pipeline Co. of America LLC system on Feb. 15 invoked force majeure at two compressor stations in Cameron Parish, Louisiana, and said the delivery point at Cheniere Energy's Sabine Pass LNG export facility would be unavailable starting Feb. 16 until further notice.

Power

• ERCOT said its system had about 28 GW of thermal generation offline and another 12 GW of wind and solar offline.
• The lost wind capacity was due to icing, but ERCOT only expected to be able to count on 2.8 GW of wind capacity this winter.
• Both reactors at Entergy's 2-GW Arkansas Nuclear One nuclear plant in Russellville were operating at reduced power Feb. 16, in response to extreme cold and high demand.
• The 903-MW Arkansas Nuclear One-1 reactor was at 33% of capacity and the 1.1-GW Arkansas Nuclear One-2 reactor was at 88% of capacity, the US Nuclear Regulatory Commission said in its daily reactor status report.
• STP Nuclear Operating Co.'s 1,312-MW South Texas Project-1 in Bay City, Texas, automatically shut Feb. 15 because of "cold weather-related issues in the plant's feedwater system," company spokeswoman Vicki Rowland said early the afternoon of Feb. 16.