Reuters are reporting that the US energy industry is braced for a major test to refineries and power plants as an intense winter storm roared up the Atlantic Coast, bringing heavy snowfall and high winds to a region already beset with several days of extreme cold.
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 4 January, knocking out power, 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 the highest in almost three years.
The extreme cold has stoked fears that a significant disruption could lead to a heating oil shortage, as inventories of distillate products, including heating oil, in the New England and Mid-Atlantic regions are at their lowest levels for this time of year since 2015. A number of tankers carrying diesel and heating oil from Europe are bound for the US to address supply worries, reversing a traditional trade route.
Reliance on heating oil is highest in the Northeast region, with about 21% of households using oil for space heating.
The US Coast Guard in the key ports of Boston, New York Harbour and Philadelphia have deployed ice-breaking ships to help keep trade traffic moving, but delays were expected. Late on 3 January, the Coast Guard said ice-breaking assets would seek safe haven from the winter storm but deploy after to ensure Northeast communities had the supplies, energy, and emergency resources needed.
Although most refineries, particularly those in northern climates, are designed to operate throughout the winter, increasingly extreme weather conditions in recent years have tested their capabilities. In 2015, more than a third of the US East Coast’s capacity was abruptly shut down due to glitches during severe weather.
Refiners along the US East Coast were bracing for difficulties in the next few days, though they have largely escaped major trouble thus far.
Energy prices are vulnerable to further spikes if cold winter weather persists, but investors should position for the likelihood of lower prices later this year.
US natural gas demand was expected to remain near record highs this week due to the frigid weather. Natural gas is the major fuel for residential and commercial heating in the US Northeast and is also widely used by power plants.
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/05012018/winter-storm-threatens-us-east-coast-energy-industry/