USGC refiners begin shutting down units amid Christmas cold snap

US Gulf Coast refiners on Dec. 23 began shutting units or were running on circulation as below-freezing temperatures continued to sweep over the region, according to refinery sources and analysts.

"Refinery outages are being reported due to the cold, but, very importantly, power has generally remained available," said Rick Joswick, head of global oil analytics at S&P Global Commodity Insights. "In 2021, similar cold led to extensive power outages which resulted in abrupt refinery shutdowns – those were deep and slow to recover from. However, if a refinery makes a more controlled shutdown due to say iced-up water lines, recovery is more likely to be easier/rapid."

About 3 million b/d of refining capacity is already impacted by closures, according to Joswick, compared to 5.6 million b/d of outages along the USGC and Midwest in the February 2021 polar vortex.

The power grid appears to be relatively stable. According to Poweroutage.us, Texas showed about 65,000 electric customers without power out of a total of almost 13 million customers tracked. Louisiana customers without power were about 18,000 out of a total of just over 2 million tracked for the state.

Prices rose on the outages, with USGC gasoline differentials strengthening Dec. 23 as market sources reported multiple unit outages at area refineries.

Pipeline CBOB (A4) on the first day of Colonial Pipeline's first shipping cycle of 2023 rose 3.5 cents to trade at NYMEX February RBOB minus 14 cents/gal. RBOB (F4) maintained a 3 cent premium over CBOB, while unleaded 87 (M4) remained 11 cents/gal over CBOB in early trading.

In the ultra-low sulfur diesel market, barrels for Colonial's 72nd cycle were heard traded before the Platts Market on Close assessment process at NYMEX January ULSD futures minus 12 cents/gal, marking a 2.50 cent/gal increase from the prior session.

Houston temperatures to rise above freezing by Dec, 26

While this spate of cold weather is unlikely to rival February 2021's polar vortex in duration, Houston is expected to see temperatures drop to a low of 21 F overnight Dec. 23 with wind chill values putting temperatures at 10 F to minus 15 F, according to the US National Oceanic and Atmospheric Administration.

However, while Dec. 24 temperatures are expected to stay below freezing, Christmas Day temperatures are expected to reach a high of 44 F, with Dec. 26 forecasts of sunny skies and temperatures in the mid-50s F.

Several refineries said they were running their flares, a safety feature designed to burn excess material resulting from both routine operations and non-routine situation such as power loss or equipment shutdown.

LyondellBasell, which operates a 263,776 b/d refinery in Houston and several other petrochemical facilities, is said by several market sources to have shut down the crude unit at the refinery, although the company did not confirm this. In a statement the company said it continues to "conduct detailed assessments" stemming from winter storm but for "competitive reasons" will not provide "specific details about units, their operational status, production figures or supply."

Market sources also said Marathon had completely shut down its 593,000 b/d Galveston Bay refinery. Company spokesman Jamal Kheiry said in an email the company does not typically comment on refinery operations.

Further north, Phillips 66 said it experienced cold-related issues which "destabilized" its 149,000 b/d refinery in Borger, Texas

Jame Rhame, chief operating officer of Vertex Energy, said the company is in emergency operations center mode "with all hands on-deck." but noted things were "so far so good" at the Mobile, Alabama, refinery it bought from Shell, which processing both petroleum and renewable feed. He said the night of Dec. 23 would be "the real test for Mobile."

"I was looking through the Houston Ship Channel emergency messages," he added. "Many guys are struggling and flaring: Pemex, Lyondell, Valero, all flaring. [We} will see how they do through the day and night. Everyone needs temperatures to get above freezing during the day so can thaw out."

Source: S&P Global Commodity Insights