Pedestrians walk on an icy road on February 15, 2021 in East Austin, Texas. Winter storm Uri has historically brought cold weather to Texas, causing traffic delays and power outages, and storms hit 26 states with a mix of freezing temperatures and precipitation.

Montinique Monroe | Getty Images

Energy prices rose Tuesday as a freezer in the south boosted fuel demand and hampered production.

According to poweroutage.us, more than 4 million people in Texas were without power on Tuesday morning as the power grid couldn’t keep up with increased demand and in some cases, utility companies were forced to implement rolling blackouts.

“Most of the heating needs in the southern region are met by electric baseboards or heat pumps,” said John Kilduff, founding partner of Again Capital. “The demand for electricity at the weekend was comparable to the heat waves in summer.”

Henry Hub natural gas futures rose 6.7% to trade at $ 3.106 per million British thermal units. The gasoline futures gained more than 4%.

“The storm that crippled the Midwest and Northeast was much worse than expected,” said Jeff Kilburg, CEO of KKM Financial. “Frigid temps and speculators that are running low are driving futures prices up dramatically.”

According to estimates by ClearView Energy Partners, the storm blocked about 30 gigawatts of generating capacity as consumers increased demand for heating for their homes. Ultimately, there just wasn’t enough supply, forcing energy companies to turn to the free market to buy electricity.

“The weather is bad enough to throttle supply when demand is close to an all-time high,” RBC analysts said in a note. “Certain regional spot prices for natural gas have risen 10 to 100 times within a few days.”

West Texas Intermediate crude oil futures, the US oil benchmark, broke above $ 60 for the first time in more than a year on Monday, despite trading below that level on Tuesday morning. Brent crude, the international oil benchmark, fell 21 cents to $ 63.09 a barrel.

The generation of units across different fuel types – including some wind production – has been taken offline, and the freezing of pipelines is hampering the flow of natural gas and crude oil. Texas is the largest producer of crude oil and natural gas in the US and has 30 refineries, according to the US Energy Information Administration.

Andy Lipow, president of Lipow Oil Associates in Texas, said that of the 2.6 million people living in Texas on Monday, only 70,000 were affected by rundown power lines or trees. He estimates that a million barrels of crude oil per day have gone offline, around 40% to 50% of natural gas production in the Permian Basin has ceased, and around 50% of wind power production has been cut off thanks to frozen leaves.

The energy sector gained more than 2% during premarket trading on Tuesday. Occidental Petroleum was up 6% in premarket trading, while Exxon, Devon Energy, Halliburton and ConocoPhillips were up more than 2%.

President Joe Biden declared a state of emergency in Texas on Sunday when the storm brought snow and ice from Arkansas to Indiana. The storm is expected to move from the Ohio Valley via Pennsylvania to Maine, according to the National Weather Service.