Millions in Texas faced power outages for a third straight day on Wednesday as the deadly storm that brought snow and ice to the region wreaks havoc on the state's energy infrastructure.
An estimated three million barrels per day of oil production remains offline. Power production from natural gas to coal to renewables has been impacted, just as consumers turn up their thermostats amid the frigid temperatures.
"A significant amount of capacity remains offline," noted Morris Greenberg, senior manager at S&P Global Platts Analytics.
West Texas Intermediate crude futures prices rose as much as 2% to trade at $61.25 per barrel, before easing off that level. International benchmark Brent crude was slightly higher at $63.51 per barrel. Gasoline futures were up nearly 1% though natural gas edged lower after jumping on Tuesday. Heating oil futures were higher.
With "oil wells and refineries offline, we could be facing a significant shortfall for a number of days, further tightening supply at a time when it has already been restricted and demand is expected to return," wrote Craig Erlam senior market analyst at OANDA.
Wholesale power prices in Texas have surged as contractual obligations forced companies to buy at any price. And some of the heightened cost could end up on Texas consumers' utility bills. Some companies like Griddy, which gives consumers access to wholesale electricity prices, outlined ways for its users to switch power providers in an effort to shield them from volatile price swings.
"Real-time power prices in Texas hit the $9,000/[megawatt hour] mark multiple times across the state, with day-ahead on-peak prices averaging more than $7,000/MWh in all four zones in the Electric Reliability Council of Texas region," noted Citi analysts. The normal price would be around $70/MWh.
The unusually harsh winter storms left more than 3 million in Texas without power, along with nearly 100,000 in Kentucky and more than 70,000 in West Virginia, according to PowerOutage.us.
The power outages raised questions about the stability of the electric grid, pushing some members of Congress to call for hearings on why the system failed.
"Ultimately, those responsible for the operation and management of our energy grid will have to answer for the glaring collapse of our energy infrastructure and inadequate communication to the public," Rep. Van Taylor, R-Texas, said in a statement.
The energy sector advanced more than 1% on Wednesday. Devon Energy gained 3%, while Exxon, Chevron and Apache were all up more than 1%. The sector gained 2.26% on Tuesday, making it the best-performing S&P group.
Source: cnbc.com
