Now as we look ahead to this winter, we are faced with
even more uncertainty than usual for this time of year.
Not only did we have an unusual underlying
distillate market leading up to this fall, the hurricanes wreaked havoc with
supply in general.
This time of year
we normally are seeing the last builds in distillate inventories in October
and November before the winter heating fuel season hits its peak in December through
Instead, because of the low
refinery production resulting from the hurricanes, distillate4 inventories are
being drawn down.
distillate supply affected by the hurricanes was low sulfur diesel and jet
fuel, which is not easy to replace with imports.
Although heating oil inventories in the
Northeast did not drop like diesel fuel
inventories, they will be affected by the general loss of distillate product
none the less.
production is still damaged and struggling to come back; import availability
of low sulfur diesel and jet is uncertain; and there are signs that demand for
distillate may increase more than usual from fuel switching due to the loss of
natural gas supply on the Gulf Coast.
most of the uncertainty points towards tighter supply this winter rather than
looser supply, which translates to high prices.
Even warmer weather may not ease prices much
under these circumstances.