Distillate Winter Demand Stronger Than Temperatures Would Imply

Source: EIA

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• Demand was one of the factors keeping inventories low this past winter. Normally, demand peaks in January.

• Distillate demand during the winter of 1998-99 was relatively low as weather was fairly warm. Diesel demand growth was the main contributor to total distillate demand growth during the winter of 1999-00 since weather again was relatively warm.
  • In December 1999, when stocks dropped below the normal band, demand was almost 12% stronger than the prior year, although U.S. temperatures were only 6% colder.
  • Some of this strength may have come from Y2K activities. For example, anecdotal evidence indicates some utilities removed themselves from the natural gas system and used distillate during the year turnover to assure uninterrupted electricity supply.

• Demand is expected to increase 4.3% this winter over last. Weather will likely average about 10% colder this year over last in the Northeast, contributing to the higher demand. But distillate demand has been boosted by very high natural gas prices, which caused some large consumers to switch from gas to distillate fuels.