Strong demand for natural gas fired heat in the Northeast is prompting energy producers to make the switch from natgas to heating oil in response to higher natural gas spot pricing. This could move farm diesel pricing higher near-term. The East Coast is set up to run either natural gas or heating oil, but has been solely focused on natgas fired heat for several years. This year, however, marks a change according to the U.S. Energy Information Administration...
"Recent extreme cold weather in the Northeast boosted natural gas demand beyond the capacity of the natural gas delivery system that supplies New York and New England. As a result, the spot price of natural gas rose above the price of distillate and residual fuel oil (on an energy-equivalent basis) in the Northeast on some days this winter (Figure 1). Because decisions regarding the dispatch of electric generation units are generally based on variable operating costs, the use of oil for power generation can increase when natural gas prices are higher than distillate or residual fuel prices in cases where fuel-switchable or oil-only units are available to operate.
In recent decades, oil-fired generation has not been economically competitive for power generation, and the share of power generated using oil has dropped from 17% in 1973 to less than 1% in recent years. However, about 30% of the electric generating capacity in New York and New England is able to switch between natural gas and oil. An additional 7 gigawatts of capacity in the region (representing 9% of the total) is oil-fired only. As a result, oil-fired generation can still play an important economic and reliability role when natural gas prices spike," according to EIA.
Crude Oil --
February 2014 WTI crude oil opened this morning at $97.67 -- 50 cents above the same time last week. A midmorning nod to the downside set off a round of trader activity that moved the contract back upward to $97.30. Strong resistance lies at $97.98. A move above that would make bulls next target $98.16 and the December high of $100.79 and beyond that, $101.81. Next support is at $96.91 and below that $93.65.
U.S. crude inventories gained 0.4 million barrels to 358.1 million barrels -- now 13.6 million barrels below year-ago.
March 2014 Brent crude oil futures opened today at $105.98 and chopped generally sideways through the day. Next support remains at $105.09. A move below those levels would suggest downside potential below $103.00. Resistance lies at $108.24 with stops every 50 cents along the way to psychological $110.00.
The WTI/Brent crude spread continued to narrow on the week, thinning $1.91 to $8.31 at the open, with Brent on top.
Home Heat --
- Residential heating oil 7 cents higher on the week to $4.24/gallon.
- Wholesale heating oil 5 cents higher on the week at $3.44/gallon.
- Residential propane softened 12 cents to $3.89/gallon.
- Wholesale propane 84 cents lower to $2.71/gallon.
Highway Fuels --
Gasoline slightly lower, highway diesel firms.
The U.S. average retail price of regular gasoline decreased less than one cent to $3.29 per gallon as of February 3, 2014, 25 cents lower than last year at this time. Prices increased one cent in the Midwest to $3.23 per gallon, and rose less than a cent on the West Coast, remaining at $3.49 per gallon. The East Coast price decreased two cents to $3.36 per gallon, and prices dropped one cent on the Gulf Coast and in the Rocky Mountains, to $3.08 per gallon and $3.13 per gallon, respectively, according to EIA.
The national average diesel fuel price was up five cents to $3.95 per gallon, seven cents lower than last year at this time. Prices increased in all regions of the nation except the Rocky Mountains, where the price declined less than a penny to remain at $3.86 per gallon. The East Coast price was $4.07 per gallon and the Midwest price was $3.94 per gallon, both up seven cents from last week. The West Coast price gained two cents to $3.99 per gallon, while the Gulf Coast price increased less than one cent to $3.78 per gallon, according to EIA.
Look for information and statistics on LP and Farm Diesel in our Monday 'Farm Fuels in Focus' report.
Graphs and indicated text provided by EIA. Excerpt taken from 'This Week in Petroleum', Feb. 5, 2014.