Frigid temperatures across swaths of the U.S. injected new momentum into the rally in energy markets Monday, boosting demand for fuel and power while threatening oil-and-gas production in Texas. Brent-crude futures, the benchmark in international energy markets, rose 1.4% to $63.30 a barrel, their highest level since January 2020. Futures for West Texas Intermediate, the main grade of U.S. crude, rose 1.1% to $60.13 a barrel and futures for natural gas at Henry Hub in Louisiana were up 4.3% at $3.04 per million British thermal units, according to FactSet.
The fresh leg in the energy market’s recovery from the coronavirus shock came as a blast of winter weather left millions of homes and businesses in Texas without power, and forced the power-grid operator in the state to order rolling outages to conserve power while demand spiked. More than 150 million Americans were under some kind of winter advisory, the National Weather Service said Monday. Some analysts think investors have pushed oil prices above levels justified by supply and demand, but others expect them to remain buoyant.
“We haven’t seen any surprising factor that would stop this kind of rally, at least not yet,” said Carole Nakhle, chief executive of consulting firm Crystol Energy. Demand is on the mend, stockpiles of crude that ballooned last year are shrinking and the Organization of the Petroleum Exporting Countries is holding millions of barrels a day back from the market, she added.
Higher crude prices are feeding through to more-expensive gasoline at the pump. Gasoline prices rose for a sixth consecutive week to a national average of $2.50 a gallon on Monday, their highest level in more than a year, according to GasBuddy, which tracks retail fuel prices. Drivers should expect gasoline prices to keep rising in the months ahead, said Patrick De Haan, head of petroleum analysis at the firm.
The Electricity Reliability Council of Texas began calling for rotating power outages overnight on Sunday to avoid widespread blackouts. The grid operator, known as ERCOT, urged consumers to reduce their electricity usage and said demand reached a winter record of 69,150 megawatts on Sunday evening. That is more than 3,200 megawatts higher than the previous peak in January 2018.
The power outages could prompt production pauses in the Southwest’s Permian Basin, leading to a moderate decline in oil output this month, according to Rystad Energy, a consulting firm.