Icy weather threatens oil output from Texas to North Dakota

Mon Jan 6, 2014 1:07pm EST

People walk in the Milwaukee Art Museum, as a winter storm moves across the midwest, in Milwaukee, Wisconsin December, 22, 2013. REUTERS/Darren Hauck

People walk in the Milwaukee Art Museum, as a winter storm moves across the midwest, in Milwaukee, Wisconsin December, 22, 2013.

Credit: Reuters/Darren Hauck

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(Reuters) - The severe cold weather sweeping across the mid-United States is threatening to curtail booming oil production as it disrupts traffic, strands wells and interrupts drilling and fracking operations.

Weather stations across the U.S. Midwest recorded some of the coldest temperatures in two decades this weekend, with many schools closed and flights delayed. Arctic cold air is also spreading across Texas on Monday with temperatures expected to drop to single digits in the morning.

Output in North Dakota, the second-largest oil producing state, usually ebbs in winter as producers scale back on drilling and well completion services such as fracking, which pumps a slurry of water, sand and chemicals into wells.

But analysts are bracing for a possibly worse than usual impact on output from the state, that could affect operations of companies such as Continental Resources, Marathon Oil and Hess Energy. The companies did not immediately reply to questions about operations on Monday.

"It is so cold that they cannot produce at full capacity, if at all. That should support prices," said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt.

U.S. crude oil prices gave up early gains on Monday, slipping 2 cents to $93.94 a barrel, although the price differential for Bakken crude in North Dakota jumped last week.

Across the border, temperatures in northern Alberta, home to Canada's vast oil sands, dropped as low as minus 38C (minus 36.4C) last week, pushing Canadian heavy crude prices to five-month highs.

WINTER IN THE BADLANDS

Winters are especially brutal in North Dakota. Although temperatures average about 13 degrees Fahrenheit (minus 11 degree Celsius) between December and February, winter storms can send that number well below 0 degrees Fahrenheit (minus 18C). Oil wells and feeder roads are usually shut as storms deposit snow.

The National Weather Service has issued warnings for life-threatening wind chills in western and central North Dakota on Monday, the heart of the oil boom, with temperatures as low as minus 60F (minus 51C) expected.

However, some forecasts show temperatures may swing back to normal levels later this week as westerly winds bring a warmer air mass to the plains in the U.S. Midwest.

"We're going to see a turnaround and temperatures will recover across the upper and lower plains by January standards," said Paul Pastelok, senior meteorologist with AccuWeather.

Freezing temperatures affected production in the Permian Basin in west Texas in December, with companies like Pioneer Natural Resources reporting cuts in their oil and gas output.

In December, a drop to minus 40F (minus 40C) in North Dakota slowed some production, officials said. A year ago, a winter storm dubbed "Gandolph" cut that month's oil production by 4.2 percent, according to the North Dakota Industrial Commission.

Bakken crude oil freezes into a substance resembling plastic when temperatures drop to between minus 40F to minus 60F (minus 40C to minus 51F), according to studies from oil producers such as Chevron.

(Reporting by Selam Gebrekidan and Ernest Scheyder in New York; Additional reporting by Nia Williams in Calgary and Christopher Johnson in London Editing by W Simon)

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Comments (4)
AlkalineState wrote:
Nonsense. If cold stopped oil output, then how do you explain Alaska?

This is the usual weekly press release from oil companies to drum up a fake supply problem and spike the price. Next week, Somali pirates are back. In their inflatable raft. Week after that, Iran gets mad at something. Didn’t see that problem coming!

Good times. Total BS.

Jan 06, 2014 1:24pm EST  --  Report as abuse
WhyMeLord wrote:
Ever since the “tea-pot dome scandal”, Big Oil has had a death-grip on the throat of the energy supplies in America. They now “circle the wagons ” as renewable energy starts to gain some real strength.
Big Oil has more excuses to halt or reduce production than Carter has little liver pills. Coupled with these excuses is the fact that we haven’t built a new refinery in 40 years. How’s that for keeping America in the hands of the robber-barons? It’s our own dumb fault.

Jan 06, 2014 2:23pm EST  --  Report as abuse
carlo151 wrote:
To answer both of the previous comments. Oil flows slow when cold, that is a fact. The oil flowing through the Alaskan pipeline is preheated.

We have enough refinery capacity, that is not a problem, 40 years ago cars got 11 mpg, we needed more gasoline for fewer cars.
The reason they want to complete the pipeline from Canada to the refineries in Texas is to export gasoline outside the US. Prices in the upper Midwest are the cheapest in the country because of the Canadian oil combined with our own oil production.

All oil produced in the US can only be sold in the US as I understand it. Sounds like a good law to me.

Jan 07, 2014 8:47am EST  --  Report as abuse
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