|SNow 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.
|SThis 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 February. Instead, because of the low refinery
production resulting from the hurricanes, distillate4 inventories are being
|SThe main 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.
|SU.S. refinery 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
|SUnfortunately, 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.