Distillate Stocks Are Important Part of Northeast Winter Supply
- Why do stocks matter in the Northeast?
- Stocks are normally an important part of PADD 1 winter distillate supply. Over the last 5 years, PADD 1 stocks provided about 15% of supply during the peak winter months of January and February. One of the biggest stock draws occurred in January 1994, when a prolonged severe cold spell required 666 thousand barrels per day of stocks, covering almost 36% of demand for that month.
- Percentages do not tell the whole story. Stocks supply close to 300 thousand barrels per day on average in January and a little less in February. That 300 thousand barrels per day represents a draw of 9 million barrels in one month. Early-February stock levels of less than 28 million barrels were almost at the minimum level ever seen in PADD 1. There was little if any inventory left above minimum working levels in PADD 1 to draw down.
- While other regions had low stocks and cold weather, the Northeast saw the unusual heating oil and diesel price surges as a result of:
- Its being the largest regional market in the country for heating oil, representing about two thirds of total U.S. heating oil used during the peak winter demand months;
- Its heavy reliance on stocks during the peak winter demand months;
- Its reliance on waterborne supply that can be affected by cold weather; and
- Its large, short-term swings in demand coming from the large utility and interruptible gas consumers jumping into the heating oil market, on top of the increase in demand from home heating oil customers.