Weather Affects Winter Heating Oil Demand (Oct - Mar)
Notes:
- To understand where stocks might go in the future, we must understand the demand and supply factors that affect stock levels.
- First consider demand. While demand for diesel fuel is influenced by the economy in the short run, demand for heating oil is strongly influenced by weather. Demand for heating oil averages about 20% of total distillate fuel demand. But in the winter it can represent well over 30%.
- This table shows winter weather and heating oil demand in the Northeast, which represented almost 60% of U.S. heating oil demand in 1999. During the winter months, the Northeast can top 70% of US heating oil demand.
- We have experienced four warm winters in a row in the Northeast. This has depressed demand over the winter months of October through March compared to “normal” or average winter weather.
- The winter of 1996-97 was closer to an average winter than the others, and EIA’s prime supplier data indicates that PADD 1 demand for No. 2 fuel oil was 9-13% less during the last three warm winters compared to winter 1996-97.
- Clearly demand for this coming winter will be higher if the weather is closer to normal.