U.S. Distillate Market Testimony for New York Assembly Hearing
Energy Information Administration
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.