16 Feb 2021 | 02:31 UTC — New York

Factbox: Power, refined products prices rally as frigid front hammers Texas

New York — Southwest power prices and refined products crack spreads rallied Feb. 15, after frigid temperatures caused rolling blackouts in Texas, causing refiners to cut operations.

As of midday Feb. 15, more than 4 million customer accounts were without power across the US with 3.4 million of those in Texas, according to poweroutage.us, which aggregates US utility outage data.

The Electric Reliability Council of Texas, which operates the grid for most of Texas, was hit particularly hard, with more than 30 GW forced offline, the worst blackouts in the state in decades.

ERCOT issued a news release before 5 pm CT Feb. 15 stating that power had been restored to about 500,000 customers, although at that time, poweroutage.us listed about 3.6 million customers as lacking electric service in Texas.

The Texas Public Utility Commission called for consumers to reduce electricity use through Feb. 16.

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 1.25 million b/d was confirmed to be shutting down entirely. However, the impact to refining operations is likely to be higher, with several plants reporting reduced operations and flaring.

Any extended outages in Texas could be bullish for US Gulf Coast refined products spot prices, and US Atlantic Coast spot refined products prices, and likely open an arbitrage for waterborne imports into the USAC if refiners remain down.

Prices

Oil

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/b the prior trading day.
NYMEX crude futures climbed to $60.95/b, the highest since Jan. 7, 2020, as the cold snap could have impacted Texas oil production.
US spot markets were closed Feb. 15 because of a holiday.
Clean tanker rates for UK Continent-USAC shipments, basis 37,000 mt, rose to be assessed by S&P Global Platts at Worldscale 125, from w117.5 the prior trading day, with a thinning tonnage list adding to bullish sentiment.

Power

Southwest Power Pool South Hub real-time on-peak locational marginal prices averaged almost $1,490/MWh through 4 pm CT (2200 GMT) on Feb. 15, but it hit a peak of more than $3,500/MWh as of 4 pm.
On Feb. 14, SPP South Hub day-ahead on-peak locational marginal prices for Feb. 15 delivery averaged $3,360.72, up from $196.78/MWh for delivery Feb. 12.

Trade flows

Oil

Extended refinery outages could open an import arbitrage into the USGC and US Atlantic Coast, which relies heavily on refined products from Gulf refineries and waterborne imports.
In the Medium Range tanker market, rates experienced an uptick with the Gran Couva heard on subjects for an Amsterdam-Rotterdam-Antwerp to US Atlantic Coast shipment, basis 37,000 mt, at Worldscale 120.
Kpler vessel tracking software shows US gasoline imports rising to 5.34 million barrels this week from 4.45 million barrels the prior week, with the bulk of imports arriving on the USAC.
Kpler data shows US diesel imports falling this week to 1 million barrels, but rising to 2.71 million barrels last week, with the bulk arriving on 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.

Power

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.
The Southwest Power Pool system reached a peakload of 43,661 MW Feb. 15 and had to call on additional operating reserves in excess of load, but this fell about 641 MW short of demand for the period beginning just after noon.

Infrastructure

Oil/Petrochemicals

Motiva is shutting its 630,000 b/d Port Arthur, Texas refinery because of the weather.
ExxonMobil's 366,000 b/d Beaumont, Texas refinery was being shut down because of power outages, according to a source familiar with operations.
Chevron said in a local environmental filing its 112,000 b/d Pasadena refinery will be preparing equipment for shutdown.
Some units at Citgo's Corpus Christi 167,000 b/d refinery were also shut down following interruption in third-party services.
Petrochemical facilities were also impacted, with Formosa Plastics USA on Feb. 13 began shutting its entire complex in Point Comfort, according to sources familiar with company operations. The company did not respond to a request for comment.
The power outages could have had an impact on Texas crude production, as the Texas Railroad Commission amended its rules to give higher priority to electric generation facilities "serving human needs customers."
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.
Magellan Midstream partners, which operates refined products and crude pipelines and terminals in the USGC, Midwest and Rockies, said there was a temporary, unspecified impact to its operations.
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. The port of Corpus Christi could not be reached for comment.