US energy sector reels after winter storm knocks out 2 million bpd of crude output

By Georgina McCartney and Arathy Somasekhar

HOUSTON, Jan 26 (Reuters) - U.S. oil producers lost up to 2 million barrels per day, or up to 15%, of the country's production over the weekend, analysts and traders estimated, as a winter storm swept across the country, straining energy infrastructure and power grids.

Oil production outages peaked on Saturday at 2 million bpd, consultancy Energy Aspects estimated, with the Permian Basin likely to have experienced the largest share of that decline at around 1.5 million bpd. Production losses eased on Monday, with Permian shut-ins estimated at about 700,000 bpd and production set to be fully restored by January 30.

U.S. oil and gas producer ConocoPhillips' COP.N Permian crude production was down by 175,000 bpd as of Sunday owing to frigid weather, according to a source familiar with the matter, who was not authorized to speak on the record.

ConocoPhillips typically does not comment on day-to-day operations, a company spokesperson said.

Chevron CVX.N reported hatches were frozen open during the storm on Sunday in Midland, Texas, according to a regulatory filing. Chevron did not immediately respond to a request for comment.

Meanwhile, ExxonMobil XOM.N was experiencing multiple shut downs in gas compressors across different fields owing to low ambient temperatures, affecting oil production because the gas compression is used to lift the oil, said a source familiar with the matter, who was not authorized to speak on the record.

"We closely monitor severe weather conditions and proactively implement necessary safety and operational measures to safeguard our people, maintain infrastructure integrity, and ensure continuity of essential operations," an ExxonMobil spokesperson said.

Companies also face third-party takeaway challenges due to hazardous road conditions, specifically regarding water hauling and technician dispatch for repairs, the Texas Oil and Gas Association said in a note.

Occidental OXY.N and Targa Resources TRGP.N were among the two dozen reports of upsets at natural gas processing plants and compressor stations in Texas, according to regulatory filings over the weekend, but that paled in comparison to the more than 200 reported upsets during the first five days of a severe winter storm in 2021, TACenergy analysts said in a note on Monday.

Occidental and Targa Resources did not immediately respond to requests for comment.

Output in North Dakota, the third-largest oil-producing state, was estimated to be down by around 80,000 to 110,000 bpd as of Monday morning, said Justin Kringstad, director of North Dakota Pipeline Authority. Associated wellhead natural gas production was estimated to be down by 0.24 to 0.33 billion cubic feet per day.

U.S. crude futures CLc1 settled at $60.63 a barrel, down 44 cents.

Average gas output in the Lower 48 U.S. states dropped to 106.9 bcfd so far in January, down from a monthly record high of 109.7 bcfd in December, according to LSEG, as producers shut in production.

On the refining side, several refineries along the U.S. Gulf Coast reported issues related to the freezing weather over the weekend, including ExxonMobil which shut units at its Baytown, Texas, petrochemical complex on the east side of Houston.

Cenovus Energy's CVE.TO 172,000 bpd Lima, Ohio, refinery experienced mechanical issues brought about by the storm on Sunday. A full restart may be delayed until later this week due to extreme cold, industry monitor IIR said.

Meanwhile, peak natural gas production losses are estimated to hit around 20 bcfd owing to the storm, according to Rystad Energy.

Front-month gas futures NGc1 closed at their highest since December 2022 on Monday, rising nearly 30% on the day to settle at $6.80 per million British thermal units.

POWER SECTOR UNDER STRAIN

Some 810,000 customers across the U.S. remained without power on Monday following the Arctic blast over the weekend that brought heavy snow, sleet and freezing rain from the Ohio Valley and mid-South to New England. Cold temperatures are expected to persist for parts of the country in coming days.

The weekend snow and ice storm knocked out power to more than a million homes and businesses along the U.S. Gulf Coast and Southeast, including in Texas.

The largest U.S. power grid, PJM, anticipated generation outages for Monday would rise to 22.4 GW, or about 16% of total committed capacity. Most of those outages are expected in Dominion Energy's Mid-Atlantic territory, according to PJM data.

Demand on PJM was 124 GW on Monday morning, above the forecast of 123.3 GW, but it continues to meet demand, PJM operations data show.

Spot wholesale electricity prices were around $200 per MWh, recovering from temporary spikes over the weekend that topped $3,000 per MWh.

Next-day prices in New England soared about 82% to $313 per megawatt hour, while PJM West prices in Pennsylvania and Maryland soared about 360% to around $413, their highest since January 2014.

The Southwest Power Pool, meanwhile, which operates the power grid across 14 U.S. states in the Midwest and West, said it extended a cold weather advisory for the region by two days and it will now run until midday Wednesday. It is meant to alert the public about possible disruptions caused by the frigid temperatures, but it does not require homes and businesses to conserve energy.