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This Week In Petroleum EIA Home > Petroleum > This Week In Petroleum |
Released on October 13, 2005
(Next Release on October 19, 2005)
Beware the Woolly Worm
In some parts of the country, it is believed that you can tell how cold the winter will be by
how narrow the brown central band is on the woolly worm (supposedly, the more narrow the band,
the colder it will be). Although scientists discount this method in predicting the severity of
the winter, this old wives’ tale continues to exist. Just as hurricanes represent the weather
wild card for oil markets during the summer and fall, the severity of the winter is vital in
determining the path of heating oil prices in the winter. This is why an expert from the
National Oceanic and Atmospheric Administration opens up the Winter Fuels Conference,
co-sponsored by the Energy Information Administration, by talking about their expectations
for the coming winter.
With several refineries still shut down following Hurricanes Katrina and Rita, distillate fuel production (which includes both diesel fuel and heating oil) is down markedly. As a result, distillate fuel inventories, which were above the average range as recently as two weeks ago (the week ending September 23), are now in the lower half of the average range, after falling by 9 million barrels in the interim. While some refineries are expected to return over the next few weeks, it may be some time before all of the refineries return to full production. With smaller volumes of refinery production entering the supply system than normal due to the refinery outages, inventories are likely to be drawn down more than usual. As a result, weather may be an even more important factor than it typically is this coming winter. As EIA’s latest outlook for the coming winter (released on October 12) highlights, much colder than normal weather will lead to significantly higher heating oil prices. Even without much colder than normal weather, EIA is expecting the average heating oil bill in the Northeast part of the country (the only area in which heating oil is a large share of the heating fuel market) to be 30 percent higher than last year. Should weather be significantly colder this winter than is currently expected, demand for heating oil will also increase, meaning customers will see higher prices and higher demand, with the result being heating oil bills even more than 30 percent higher than last year. Conversely, should the weather be significantly warmer than expected, while heating oil customers will still likely see higher bills than last year, the increase would be markedly less than the 30 percent increase EIA is projecting in the base case. Obviously, how low temperatures get will be a major factor this year, which may explain why there is a lot of interest in what the weather forecasters are saying.
For the latest information on how oil infrastructure is being impacted in the aftermath of Hurricane Katrina, see EIA’s Daily Report and more detailed reports from the Office of Electricity Delivery & Energy Reliability.
Jet Fuel Demand in Recent Weeks May be Slightly Underestimated
Data released earlier today indicated that over the last four weeks, jet fuel demand is 4.4
percent lower than for the similar four-week period last year, driven in part by a very large
drop for the week ending October 7. More precisely, the data reflected how much jet fuel was
being supplied into the market as opposed to how much is actually being consumed.
However, it is possible that jet fuel product supplied (a proxy for demand) may be slightly
underestimated as, for example, there is anecdotal evidence that some companies currently
importing jet fuel may not normally import refined products, especially not into the Gulf
Coast region (PADD 3). As a result, these companies may not yet be included in EIA’s sampling
frame, or alternatively, it may be that actual imports are lagged in the weekly reporting
process. The unusual circumstances following Hurricanes Katrina and Rita may have precipitated
changes in petroleum markets heretofore unseen. More certain is the added difficulty in
measuring oil flows to end users. While EIA is attempting to publish the best possible data,
in light of unusual circumstances, some items may be more difficult to track down, requiring
more time than usual for the underlying patterns to emerge. Jet fuel imports may be one of
those items. Until the monthly data is released (September’s data will be released toward the
end of November while October’s data will be released toward the end of December), we will not
know definitively whether jet fuel imports (and demand) are actually higher than recently
published levels in our Weekly Petroleum Status Report.
Residential Heating Fuel Prices: Heating Oil Decreases While Propane
Rises
Residential heating oil prices decreased for the period ending October 10, 2005. The average
residential heating oil price dropped 4.4 cents from last week to reach 264.8 cents per gallon,
an increase of 74.0 cents from this time last year. Wholesale heating oil prices decreased
15.5 cents to reach 208.5 cents per gallon, an increase of 58.5 cents compared to the same
period last year.
The average residential propane price increased 2.0 cents, to 193.6 cents per gallon. This was an increase of 33.2 cents over the 160.4 cents per gallon average for this same time last year. Wholesale propane prices decreased 2.5 cents per gallon, from 124.0 to 121.5 cents per gallon. This was an increase of 25.4 cents from the October 11, 2004 price of 96.1 cents per gallon.
U.S. Average Retail Gasoline Price Falls 8 Cents
The U.S. average retail price for regular gasoline decreased by 8.0 cents to 284.8 cents per
gallon, after rising the previous two weeks. This week’s price is 85.5 cents higher than this
time last year. Prices were down throughout the country, with the Midwest seeing the largest
regional decrease of 14.0 cents to 276.0 cents per gallon, the lowest price in the country.
East Coast prices fell by 7.5 cents to 288.3 cents per gallon. The West Coast averaged 293.2
cents per gallon, the highest in the country, after falling 1.3 cents; California prices lost
0.9 cent to 296.4 cents per gallon.
Retail diesel fuel prices rose 0.6 cent to reach 315.0 cents per gallon, the highest price on record. Prices were mixed throughout the country, with the Rocky Mountains seeing the largest increase of 6.4 cents to 314.3 cents per gallon. Regionally, Gulf Coast prices were the highest in the nation, down 0.3 cent to 318.2 cents per gallon. California prices averaged 324.0 cents per gallon, a decrease of 2.2 cents. West Coast prices fell 0.7 cent to 316.7 cents per gallon.
Propane Inventories Edge Lower
U.S. inventories of propane edged lower by 1.2 million barrels last week as propane markets
entered the first week of the traditional heating season that typically spans the October
through March period. As of October 7, 2005, the nation’s primary stockpile of propane
totaled 67.4 million barrels, a level that remains near the upper boundary of the average
range for this time of year. Despite the partial rebound in propane production last week,
the drop in imports from the prior week’s robust volume contributed to the weekly fall in
inventories.
Inventory declines were spread over most of the major propane consuming regions with East Coast inventories falling by 0.1 million barrels, while Gulf Coast inventories declined by 1.4 million barrels during this same time. Midwest inventories only managed a 0.1-million-barrel build last week while the combined Rocky Mountain/West Coast regions posted the largest weekly gain that measured 0.2 million barrels. Propylene non-fuel use inventories plunged 0.3 million barrels last week to 4.2 million barrels, a level accounting for a 6.2 percent share of total propane/propylene inventories.
Text from the previous editions of “This Week In Petroleum” is now accessible through a link at the top right-hand corner of this page.
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-8.0
85.5
