Natural gas futures contracts were leading an increase in energy prices across Tuesday, while large areas of the U.S. struggled with sub-zero temperatures and blackouts reaching several states.
March HOH21 natural gas futures,
rose 5.5%, to $ 3,073 per million British thermal units, while March gasoline RBH21,
rose 5.3% to $ 1.7813 a gallon. And March heating oil RBH21,
rose almost 3% to $ 1.8235 a gallon.
The price increase came when Southwest Power Pool, a group of utilities covering 14 states, ordered utilities to start rolling blackouts to deal with the depletion of backup power supplies. It is like a winter storm swept from the Ohio Valley to the Gulf Coast of the United States, bringing freezing temperatures as far south as San Antonio, Texas.
The extreme winter weather was forcing wind power generators in Texas to go offline and causing spikes in electricity prices. The Texas Electric Reliability Council estimated that two million people were left without power on Monday night, The Wall Street Journal reported. President Joe Biden declared a state of emergency in Texas at the request of Governor Greg Abbott, paving the way for emergency aid to reach the state. The storm has killed two people in Texas so far.
The rare storm that hit Texas was also raising concerns about oil supply disruptions amid reports of some refineries shutting down due to extreme cold.
The deep freeze also triggered a strong gain in oil futures prices on Monday. Regular trade was closed due to the Presidents Day holiday.
March CL.1 crude oil prices,
rose 61 cents, or 1%, to $ 60.08 a barrel, after reaching $ 60 a barrel for the first time since January 2020 on Monday. Brent BRN00 oil prices,
gained 27 cents to $ 63.47 a barrel, also marking a rise in January 2020.
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“But since the increase in energy demand in Texas and the drop of up to one million barrels in daily supply are temporary, levels above $ 60 seem attractive to top sellers,” warned Ipek Ozkardeskaya, senior analyst at Swissquote, in note to customers. “A negative correction could easily come into play and pull prices below $ 55 a barrel, but it should not undermine the positive medium-term trend in oil prices.”