Petroleum Report: Persistent Winter Holds Energy Hostage

February 27, 2014 03:47 AM
 

 

This year's persistent cold temperatures have had a variety of impacts on the national heating fuels supply. Demand for space heat has been extremely high in the Northeast, but even areas as far south as Louisiana have seen price spikes for home heat. As natural gas prices climbed above $6.00, economics forced energy suppliers in the Northeast to seek out alternative fuels which have included a measure of biofuels, but our concern is for the extra draw on the distillate supply.

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According to EIA, "As natural gas supply to power plants was curtailed and as prices for natural gas spiked higher, electricity generators increased their use of residual fuel and distillate fuel to replace natural gas for power generation. U.S. residual fuel consumption, which averaged 220,000 barrels per day (bbl/d) during December and early January, more than doubled to 471,000 bbl/d for the week ending January 17. U.S. distillate consumption also rose sharply, to 4.5 million bbl/d for the week ending January 24, an increase of 22% from the same week last year and a 50% increase from the week ending January 3."

The cold has also contributed to disruptions in crude oil and natural gas production, refinery, rail, and pipeline operations, and gasoline and distillate production and supply. Drilling sites, pipelines and hydraulic fracking operations have all required heaters to keep fluids and equipment from freezing, adding extra time and extra expense.

Imports into the Northeast of propane and distillates have helped support the waning national supply, but the Polar Vortex is headed our way once again and weather forecasters have another round of bitter cold and potentially moderate amounts of snowfall predicted for the weekend and into next week. That will continue to make it difficult to extract, refine and transport fuels of all kinds around the United States, and prices for crude oil, natural gas, propane and distillates will remain high as long as winter persists.

Crude Oil --

April 2014 WTI crude oil opened this morning at $102.59 -- 30 cents below the same time last week. Yesterday the contract fell back from Monday's high of $103.04, mustering a rally only as high as $102.90. Next support is at$98.59 and $96.91 on its way back below $95.00. $102.90 is strong resistance, tested five times in the last week and a half.crstuss

U.S. crude inventories gained 0.1 million barrels to 362.4 million barrels -- now 15.1 million barrels below year-ago.

April 2014 Brent crude oil futures opened today at $109.41. Next support lies at $107.65 and a move below $104.75 would clear the way to bears' target of $102.86. Tough resistance lies at $110.10 and $110.41 along the way to $110.75.

The WTI/Brent crude spread narrowed 43 cents on the week to $6.82 at the open, with Brent at a premium.

Home Heat --

  • Residential heating oil 2 cents higher on the week to $4.24/gallon.
  • Wholesale heating oil nearly one full cent lower on the week at $3.39/gallon.
  • Residential propane softened another 16 cents to $3.48/gallon.
  • Wholesale propane 34 cents lower to $1.84/gallon.

 

Highway Fuels --

Gasoline & highway diesel firm.

"The U.S. average retail price of regular gasoline increased six cents to $3.44 per gallon as of February 24, 2014, 34 cents lower than last year at this time. Prices increased in all regions of the nation, with the Midwest, Rocky Mountain, and West Coast prices all increasing eight cents, to $3.44 per gallon, $3.32 per gallon, and $3.65 per gallon, respectively. The East Coast price gained five cents to $3.46 per gallon, and the Gulf Coast price was $3.21 per gallon, three cents higher than last week," according to EIA.

"The national average diesel fuel price was up three cents to $4.02 per gallon, 14 cents lower than last year at this time. Prices increased in all regions of the nation, with the Rocky Mountain price increasing the most, five cents from last week, to $3.95 per gallon. The West Coast price was $4.04 per gallon, four cents higher, while the Midwest price increased three cents to $4.03 per gallon, above the $4-per-gallon mark for the first time since March 18, 2013. The Gulf and East Coast prices both rose two cents, to $3.81 per gallon and $4.15 per gallon, respectively," according to EIA.

Look for information and statistics on LP and Farm Diesel in our weekly 'Farm Fuels in Focus' report.


Graphs and indicated text provided by EIA.

 

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