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Notes:

• The Northeast distillate market is experiencing some difficulties that are being reflected in prices. Residential heating oil prices on January 24 were up 35-60 cents per gallon in the Northeast over the prior week, compared to an increase of only 5 cents in the Midwest. Diesel prices are showing a similar pattern. Diesel fuel prices in New England and the Mid-Atlantic increased 30-40 cents January 24 over the prior week, and another 13-15 cents by January 31.

• During the week ending January 21, the combination of low stocks, forecasts for colder than normal weather through early February, some barges being delayed due to storms, and unexpected refinery problems set off a price spike in the New York Harbor spot market as buyers found it difficult to locate immediate supply. Not only were refiners in the market trying to replace lost production, but it was reported that utilities and interruptible natural gas buyers were adding to the pressure as they sought peaking and substitute fuel to meet the cold weather demand.

• Refining capacity is adequate to meet the needs, but there will be some delay before new supply arrives -- perhaps several weeks. However, high prices speed the arrival of product to the needed locations.

• Unfortunately, even when this problem is resolved, we may see recurrences, as stocks are likely to stay low for the remainder of the 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.