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- During the second half of January, U.S. diesel and heating fuel prices surged. The largest increases occurred in the distillate-based fuels (heating oil and diesel) in the Northeast.
- From January 17, New England residential heating oil prices rose over 78 cents per gallon to average $1.97 February 7; diesel increased 68 cents per gallon, averaging $2.12 February 7. Prices for both fuels began to fall back by February 14 as new supplies were arriving, and have continued to decline since.
- The main factors driving up these prices were low stocks leading into January, followed by a bout of severe weather that impacted both supply and demand.
- Demand: Cold weather increases core heating customer demand. In addition, it was reported that utilities were buying distillate both for peaking power and, along with industrial and commercial users, to substitute for interruptible natural gas supplies, further adding to the market pressure. Finally, refinery outages during the week ending January 21 sent more distillate buyers into the market as local supplies in the Northeast were temporarily drained, and prices spiked.
- Supply: Weather hindered flows of product to the Northeast as high winds kept barges from landing in New York Harbor and frozen rivers slowed crude oil and product flow throughout the Northeast.
- Although new supply is arriving, the problem is not resolved. Stocks remain low, and we could still see a recurrence before the end of winter.
- The low stock situation is worldwide and is not limited to distillate. It stems from what is happening in the crude oil markets. A continuing crude oil supply shortage is driving crude prices up and causing refiners worldwide to draw down stocks as the higher crude prices squeeze margins.