Brent oil surged above $60 a barrel for the first time in more than a year Tuesday as power outages related to a crippling winter storm and deep freeze that brought much of the U.S. South to a standstill disrupted crude production and forced the shutdown of some of the nation’s biggest oil and petroleum refineries.
Futures in London traded above $63 a barrel after rising 1.4% Monday, their highest levels in 13 months, as the unusual winter storm and cold snap crippled power systems in Texas, Louisiana, Oklahoma and other parts of the south – in turn halting production of as much as 1.7 million barrels a day of oil output and forcing pipelines to declare force majeure.
Natural-gas futures rose 5.7%. Since natural gas is burned to generate electricity and heat, its price tends to rise during cold snaps. Gasoline futures rose 4.3%. Several large refiners, which convert crude oil into usable fuels, have shuttered in response to the low temperatures and adverse conditions, according to media reports.
The brutally cold weather, which has transformed the normally temperate southern plains into a rare freeze, toppled century-old records across the region, causing rare snow, sleet and ice conditions to prevail in typically warm locales including Houston and Galveston, Texas, and promising one of the coldest Fat Tuesday’s on record for New Orleans.
More than 3.8 million people are waking up without power in Texas, according to poweroutage.us, as record low temperatures prompt a surge in demand for power that the state’s electric grid can't keep up with. The hardest-hit areas are around Galveston and Houston, according to the website.
Increased energy demand across parts of the southern Plains not only triggered rolling blackouts in Oklahoma and Texas amid a surge in demand for heat and electricity, but an increase in crude oil prices, which hit their highest level since the pandemic began more than a year ago.
“The refineries along the Texas Gulf Coast will undoubtedly be severely affected by the extreme cold,” AccuWeather founder and CEO Joel N. Myers said. “In 1989, the last time it got this cold [along the Texas Gulf Coast], the refineries froze and the price of heating oil more than doubled.”
The combination of frigid temperatures and oil well and refinery closures has spurred a scramble for fuels and is likely to lead to higher American prices for everything from gasoline to propane, energy producers said. The crisis is just the latest in a series of cold snaps in the Northern hemisphere that have boosted oil and gas consumption this year.
Brent crude for April settlement rose 0.2% to $63.45 a barrel on the ICE Futures Europe exchange in London. It closed at $63.30 on Monday, the highest since Jan. 21, 2020. West Texas Intermediate for March delivery advanced 1% from the close on Friday to $60.09 on the New York Mercantile Exchange. Prices didn’t settle Monday due to a holiday in the U.S.