US refined product cracks surge as Arctic freeze takes down Texas refineries

Refined products crack spreads surged Feb. 15 following news that several refineries in the Texas area were brought down, or having issues, after freezing temperatures hit power supplies.

The front-month ICE RBOB futures crack spread to Brent ended the day at $12.40/b, up from $11.69/b the prior trading day. The ICE ULSD crack to Brent ended at $14.70/b, up from $13.75 the prior trading day.

Earlier in the day, WTI crude hit $60.95/b, the highest since Jan. 7, 2020, as the cold snap pushed up prompt demand for the US benchmark crude.

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FACTBOX: Deep freeze prompts upsets, shutdowns at US Gulf Coast petrochemical plants

The refinery outages would be bullish for US Gulf Coast spot products prices, but spot markets were closed Feb. 15 due to a holiday.

Any extended outages in Texas could be bullish for US Atlantic Coast spot refined products prices as well, and likely open an arbitrage for waterborne imports. The USAC is dependent on refined products shipped up the Colonial Pipeline, and on imports.

Colonial Pipeline could not be reached for comment.

Motiva is shutting its 630,000 b/d Port Arthur, Texas refinery because of the weather.

"Unprecedented freezing temperatures necessitated safely and methodically shutting down our Port Arthur Manufacturing Complex. We are carefully monitoring weather conditions and will resume normal operations as soon as it is safe to do so," Motiva told S&P Global Platts in an email.

Chevron, Citgo affected

Texas is home to 5.9 million b/d of refining capacity, according to the US Energy Information Administration. USGC refiners have been gradually boosting runs since October as some demand has returned on an easing of coronavirus restrictions. As of Feb. 5, USGC refiners were operating at 85.3% of capacity.

ExxonMobil's 366,000 b/d Beaumont, Texas refinery was being shut down because of power outages, according to a source familiar with operations. ExxonMobil could not be reached for comment.

Chevron said in a local environmental filing its 112,000 b/d Pasadena refinery will be preparing equipment for shutdown due to harsh winter weather conditions.

"You may see flaring or smoke as a result of this activity. This is expected to last over the next 24 hours," the company said.

Shell said it was performing work at its 310,000 b/d Deer Park refinery that may cause flaring.

Valero's said in a filing it may flare at its 250,000 b/d Houston refinery, while flaring at Houston area plants was also reported by Flint Hills and LyondellBasel.

CITGO's Corpus Christi 167,000 b/d refinery has also been affected by unusually the freezes in southeast Texas, with some units shut down following interruption in third-party services, the refiner said Feb. 15.

"Refinery personnel are securing the units and assessing safe startup," CITGO said in an e-mail. "The refinery is following all safety and severe weather procedures to ensure the safety of employees and the surrounding community."

Enbridge Line 59 down

The power outages have caused problems with at least one crude pipeline. Enbridge said its 585,000 b/d Flanagan South pipeline (Line 59) lost power. The pipeline delivers crude from Flanagan, Illinois to Cushing, Oklahoma, the delivery and pricing hub for NYMEX crude futures.

"Enbridge crews are working with electric utility providers to restore power to Line 59," the company told S&P Global Platts.

Near record-breaking temperatures have dropped well in the teens in Texas. The freeze is expected to persist through Feb. 15 through the morning of Feb. 16, according to the National Weather Service.

A wind chill warning remains in effect until noon Central time Feb. 16, NWS said, adding that "bitterly cold air will continue filtering into the area and temperatures will remain well below freezing through most of" Feb. 16.