By Nicole Jao
NEW YORK, Jan 21 (Reuters) – U.S. refineries are preparing for extreme cold weather as an unexpected Arctic blast rolls in, threatening to disrupt operations.
A cold front will bring frigid temperatures to the eastern two-thirds of the country, the National Weather Service said on Wednesday, expecting sub-zero lows to spread from the Northern Plains to the Northeast by Sunday and reach the Gulf Coast by early next week.
Most refineries are designed to operate between 32 and 95 degrees Fahrenheit (0 to 35 degrees Celsius). Extreme cold could lead to equipment malfunctions and a reduction in refining capacity.
“About 7 million barrels of crude oil production could be curtailed across the Rockies, Permian and Anadarko regions, and refinery runs in Oklahoma could fall by around 200,000 (barrels per day),” a trading source said.
Citgo’s Lemont, Illinois, refinery experienced an operational upset on Monday, a filing shows, as temperatures dipped below freezing. Citgo did not immediately respond to requests for comment.
Other refineries in the region have implemented precautionary measures.
HF Sinclair’s refinery in El Dorado, Kansas, is running at reduced rates as a precaution, a source familiar with the operations said. The company did not immediately respond to requests for comment.
Marathon has plans in place during severe weather, a Marathon spokesperson said, but declined to comment on operational details.
U.S. diesel futures surged about 4% on Wednesday. The rally was mainly driven by a spike in natural gas prices.
U.S. natural gas futures soared to a six-week high on Wednesday, marking a record 57% rise over the past two trading sessions, on expectations that extreme cold temperatures will boost heating demand to near-record levels.
“A widespread shot of Arctic air sweeping the country seems to have caught the market off guard after multiple forecasts for the back half of the month called for higher than average temperatures, and is increasing the odds of some utilities leaning on supplemental supplies to cover the surge in heating demand,” according to fuel distributor TACenergy.
(Reporting by Nicole Jao in New York; Additional reporting by Shariq Khan in New York; Editing by Rod Nickel)
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