Extreme Winter Weather Lifts Gas While Storm-Driven Demand Losses Cap Crude Upside

Crude softens as winter storm curbs Gulf Coast demand

• The WTI prompt-month contract slipped $0.40 to $60.67/Bbl on Monday morning (7:45 AM CT)
• A severe winter storm is disrupting operations along the Texas Gulf Coast, affecting refiners, petrochemical facilities, and industrial manufacturers
• • Major operators including Exxon Mobil, Celanese, and Goodyear have curtailed or shut down activity at select facilities amid freezing conditions
• For crude markets, the demand-side impact of industrial slowdowns is offsetting expectations that weather-related production disruptions would tighten supply
• In Kazakhstan, supply risks appear to be easing as power systems at the Tengiz field move toward a restart
• • Tengizchevroil halted operations following fires at power generators, with Kazakhstan’s output expected to average roughly 1.0–1.1 MMBbl/d during the disruption, according to JPMorgan
  • Conditions at the CPC export terminal are also improving, with repairs completed at one offshore mooring and loadings now occurring from two jetties, easing backlog concerns
• Geopolitical tensions remain elevated after the US deployed additional naval assets to the Middle East, reviving speculation over potential escalation with Iran
• Together, lingering geopolitical risk and recent supply disruptions continue to provide near-term support to crude prices, even as expectations of a global surplus persist

Natural gas continues to climb amid winter storm impacts

• The February Henry Hub contract (which expires on Wednesday) has gained another 52c, but traded as high as $6.30/MMbtu overnight
• Winter storm Fern continues to push eastward, with weather impacts now reaching the Northeast after temperatures plunged across the South Central and Midwest this weekend
• Weather models are showing temperatures well below the ten-year average for the next two weeks, although this current week is anticipated to be the coldest
• Dry gas production is at 99 Bcf/d this morning, which is a slight improvement from the lows of 97 Bcf/d seen over the weekend
• • Freeze offs may increase as temperatures in the Northeast are expected to fall further today and tomorrow
• LNG feedgas demand fell significantly, with inflows to export plants totaling 13.78 Bcf/d this morning and 12 Bcf/d yesterday

US power grids tested by demand surge (Bloomberg)

• Unprecedented seasonal demand continues to impact US power grids, while snow and ice have resulted in more than 800k customers losing power
• The PJM interconnection is preparing for seven consecutive days of extreme demand and has begun paying some large customers to reduce power consumption
• ERCOT is forecasting record demand of 86 GW, surpassing the August 2023 record
• Natural gas usage by the power sector has surged as generation from renewables has suffered in recent days