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NEW YORK/LONDON: An intense winter storm froze pipes and disrupted services at refineries on the US Atlantic coast on Thursday, sending fuel prices higher as heavy snowfall and high winds caused electricity outages for tens of thousands of Americans.
Some 65,000 homes and businesses along the US East Coast are without power, and that number is expected to swell on Thursday as the storm punishes the densely populated US Northeast.
The storm is the product of a rapid and rare sharp drop in barometric pressure known as bombogenesis, or bomb cyclone. Heavy snow pounded the East Coast along a front stretching from Maine as far south as North Carolina early on Thursday, taking out power lines, icing over roadways and closing hundreds of schools.
Prices for heating oil and natural gas in the US Northeast hit their highest levels in years on the back of near-record heating demand. Benchmark US heating oil futures are near their highest in almost three years.
US natural gas demand was expected to remain near record highs this week. Natural gas is the major fuel for residential and commercial heating in the US Northeast and is also widely used by power plants.
On Wednesday, natural gas futures fell 1.6 percent to $3.008 per million British thermal units, but cash prices in New York and New England remain elevated.
“NYMEX Henry Hub prices should rise further to the mid-$3 range, as cash Henry Hub prices already traded above $6. But the market, due to the supposed record-breaking production growth in 2018, still seems to be under-appreciating the potential for cold weather persisting,” Citi analysts said in a note.
New England’s cash prices soared last week, and remain near four-year highs at $36.32 per mmBtu. ISO-New England, that region’s power grid operator, said on Thursday that its power operators were relying more heavily on generators that burn heating oil, due to heavy natural gas demand from homes and businesses.
“We expect to have sufficient capacity and fuel available and expect to be able to weather the storm without running up against significant emissions limits, but concerns remain the same regarding fuel availability and emissions limits throughout this protracted cold spell and the rest of the winter,” the company said in a statement.
There are fears that a significant disruption could lead to a heating oil shortage, as distillate inventories, including heating oil, in the New England and Mid-Atlantic regions are currently at their lowest levels for this time of year since 2015.
This has spurred tankers carrying diesel and heating oil to set out from Europe bound for the United States to address supply worries, reversing a traditional trade route.
Icebreakers have been used in key ports of Boston, New York and Philadelphia to keep shipping lanes clear, though delays are expected, and the Coast Guard said late Wednesday that those ships will remain at shore until the storm passes.
Reliance on heating oil is highest in the Northeast region, with about 21 percent of households using oil for space heating.
So far, most northern US refiners are not reporting problems. Phillips 66 shut a crude and coking unit at its Wood River, Illinois, refinery after a line froze followed by a brief fire, a source told Reuters on Wednesday. It did not currently have a timeline for restarting the units at the Illinois plant, the source said.
Philadelphia Energy Solutions postponed planned work at its 335,000 refinery complex in Philadelphia until after the storm.
Valero’s 125,000 bpd refinery in Meraux, Louisiana, restarted most operations after sub-freezing conditions froze instruments earlier this week, according to a report by Energy News Today (ENT).
Valero was forced to cut rates at its Port Arthur, Texas, refinery due to the cold weather, ENT reported, and operations are expected to return to normal by the end of the week.