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The US has been recently hit with cold weather that has broken records in many states, including in New York where the minus 16 Celsius managed to break a record that had stood since 1896. This arctic chill has forced natural gas and gasoline pipeline operators to reduce flow and refineries to scale back production, after some systems have started to fail under the extreme conditions. The instruments that control the flow have failed and some product has thickened or turned to jelly in some of the lines.
Due to the reduced production and delivery, oil prices have risen for the send straight day, and natural gas prices are at a 17 month high.
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Tyson Brown, a statistician from the EIA, explained that “the very cold temperatures widespread from Chicago east are driving up demand for natural gas,” but that “temperatures look to get a little bit more normal and ease off through the rest of the week.”
A vehicle struggling in the cold weather in New York.
The weather forced Kinder Morgan to announce a force majeure in Alabama and Georgia, as well as its ethanol terminal in Illinois, a fuel hub for the Midwest.
Eric Rosen, the vice president of sales, supply, and trading at Papco Inc., said that “at some point you have to have the gasoline blend with the ethanol, and that line from the ethanol tank to the rack is where you see a lot of those issues where it gets frozen.”
Other pipeline operators have declared similar force majeures in Pennsylvania, Illinois, and Utah, and production has fallen in the US Rockies, the Midcontinent, the Gulf Coast, and the Northeast.
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Bloomberg reports that:
PBF Energy’s 185,000 barrel a day refinery in New Jersey has had to shut down most production after the cold led to a loss of steam.
Valero Energy’s 195,000 barrel a day plant in Tennessee experienced frozen instruments and had units automatically trip offline.
Marathon Petroleum’s 114,000 barrel a day refinery in Detroit has managed to restart several units that had to be shut down after the cold weather caused instruments to fail.
Exxon Mobil’s 238,000 barrel a day refinery in Illinois has resumed full operation after some units suffered due to the extreme cold.
Korea National Oil Corp’s 115,000 barrel a day plant in Newfoundland was still not up and running after the weather caused a power cut across the entire island.
In total it is believed that the weather caused plant with a capacity of at least 800,000 barrels of day to shutdown.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com