Slide 14 of 24
While the relatively low stock forecast (although not as low as last winter) adds some extra pressure to prices, the price of crude oil could be the major factor affecting heating oil prices this winter.
The current EIA forecast shows residential prices averaging $1.29 this winter, assuming no volatility. The average retail price is about 7 cents less than last winter, but last winter included the price spike in November 2000, December 2000, and January 2001.
Underlying crude oil prices are currently expected to be at or below those seen last winter. WTI averaged over $30 per barrel last winter, and is currently forecast to average about $27.50 per barrel this winter.
As those of you who watch the markets know, there is tremendous uncertainty in the amount of crude oil supply that will be available this winter. Less supply means higher crude prices and thus higher heating oil prices. And as we saw last year, weather also adds to the uncertainty.