Winter Distillate Outlook Joanne Shore Energy Information Administration PPMCSA Annual Meeting &...
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Winter Distillate Outlook Joanne Shore Energy Information Administration PPMCSA Annual Meeting & Trade Show September 2000
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Factors Driving Prices & Forecast zCrude Oil Prices zDistillate Price Spread Affected by Supply/Demand Balance yDemand yProduction yNet Imports yInventories -- Measure of Balance zDistillate Forecast
Transcript of Winter Distillate Outlook Joanne Shore Energy Information Administration PPMCSA Annual Meeting &...
Winter Distillate Outlook
Joanne Shore Energy Information Administration
PPMCSA Annual Meeting & Trade Show September 2000
Distillate Prices Increasing With Crude Oil
0
20
40
60
80
100
120
140
160
Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00
Cen
ts P
er G
allo
n
Source: Spot Prices, S&P DRI Platt's; Retail, EIA
Monthly Average Prices
Spot West Texas Intermediate
East Coast Retail On-Highway Diesel Fuel
East Coast Residential Heating Oil
Factors Driving Prices & Forecast
Crude Oil PricesDistillate Price Spread Affected by
Supply/Demand Balance Demand Production Net Imports Inventories -- Measure of Balance
Distillate Forecast
First Factor Impacting Distillate Prices: Crude Oil Prices
0
5
10
15
20
25
30
35Ja
n-97
Jul-9
7
Jan-
98
Jul-9
8
Jan-
99
Jul-9
9
Jan-
00
Jul-0
0
Jan-
01
Dol
lars
Per
Bar
rel
West Texas Intermediate Monthly Average Prices
History Forecast
Forecast: Energy Information Administration September Short Term Energy Outlook
3.4
3.5
3.6
3.7
3.8
3.9
Dec
-92
Dec
-93
Dec
-94
Dec
-95
Dec
-96
Dec
-97
Dec
-98
Dec
-99
Dec
-00
Bill
ion
Bar
rels
OECD Petroleum Inventory
Actual
Normal Stock Level
Forecast
High Crude Prices Go With Low Inventories
Forecast: Energy Information Administration September Short Term Energy Outlook
Second Price Component: Spread Impacted by Distillate Supply/Demand Balance
0
20
40
60
80
100
120
Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00
Cen
ts P
er G
allo
n
NY Harbor Distillate - WTI Crude Oil Price
Source: DRI Platt's Spot Prices
Spot Heating Oil Price
WTI Price
Distillate Stocks are Low – Especially on the East Coast
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
Dec-98 Jun-99 Dec-99 Jun-00 Dec-00
Thou
sand
Bar
rels
East Coast Total Distillate StocksEast Coast
Actual
Normal Range
Source: EIASource: EIA
Distillate Stocks Are Important Part of East Coast Winter Supply
15% 17% 15%
28% 25% 25% 27%
49% 45% 43% 42%
13% 15% 15% 16%
10%0%
25%
50%
75%
100%
Dec Jan Feb Mar
Net Imports
Other USRegionalSupply
East CoastProduction
Stock Draw
Average East Coast Supply as Percent of Demand
Source: EIA
Winter Demand Impacted by Weather
0
200
400
600
800
1000
1200
Oct Nov Dec Jan Feb Mar Apr
Hea
ting
Deg
ree
Day
s
1999-2000
95% Confidence Interval
Normal
Source: National Oceanographic and Atmospheric Administration; Normals: EIA.
Warm Winters Held Heating Oil Demand Down While Diesel Grew
0
500
1000
1500
2000
2500
3000
Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00
Thou
sand
Bar
rels
Per
Day Low Sulfur
(Diesel)
High Sulfur(Heating Oil)
U.S. Product Supplied
Source: EIA
Distillate Demand Strong in December 1999
2700
2900
3100
3300
3500
3700
3900
4100Ju
l
Aug Se
p
Oct
Nov Dec Jan
Feb
Mar
Apr
May
June
Thou
sand
Bar
rels
Per
Day
Average 95-991998-991999-002000-01Forecast
U.S. Total Distillate Product Supplied
History: EIA; Projections: Short-Term Energy Outlook, September 2000
Dec 1999 & Jan 2000 Production Fell, But Rebounded with Price
2700
2900
3100
3300
3500
3700
3900
4100Ju
l
Aug Se
p
Oct
Nov Dec Jan
Feb
Mar
Apr
May
June
Thou
sand
Bar
rels
Per
Day
Average 95-99 1998-99 1999-002000-01 Forecast
U.S. Total Distillate Production
History: EIA; Projections: Short-Term Energy Outlook, September 2000
Higher Yields Can Be Achieved
21%
22%
23%
24%
25%
26%
1996 1997 1998 1999 2000
Quarter 3 Quarter 4
Quarterly Average Distillate Yields (Distillate Production/Crude Inputs)
Forecast
History: EIA; Projections: Short-Term Energy Outlook, September 2000
Unusual Net Imports May Only Be Available at a High Price
0
50
100
150
200
250
300
350
400Ju
l
Aug Se
p
Oct
Nov Dec Jan
Feb
Mar
Apr
May
June
Thou
sand
Bar
rels
Per
Day
Average 95-991998-991999-002000-01Forecast
U.S. Distillate Net Imports
History: EIA; Projections: Short-Term Energy Outlook, September 2000
8090
100110120130140150160170180
Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01
Mill
ion
Bar
rels
Actual
Forecast
U.S. Total Distillate Stocks
Normal Range
Distillate Stocks Expected to Remain Low
History: EIA; Projections: Short-Term Energy Outlook, September 2000
0
20
40
60
80
100
120
140
160
Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01
Cen
ts P
er G
allo
n
Monthly Average Prices
Spot West Texas Intermediate
East Coast Retail On-Highway Diesel Fuel
East Coast Residential Heating Oil`
Projection
Distillate and Crude Oil Price Distillate and Crude Oil Price ForecastsForecasts
Source: Spot Prices, S&P DRI Platt's; Retail, EIA
Consumer Winter Heating Oil CostsAverage Northeast Household Heating with
Oil
97-98Actual
98-99Actual
99-00Actual
00-01Forecas
tGallons 636 647 643 683
$/Gal $0.93 $0.80 $1.19 $1.32
Cost ($) $591 $518 $765 $901
Forecast: Energy Information Administration September Short Term Energy Outlook
Conclusion Distillate stocks likely to be low going
into winter – increases odds for volatility
Prices expected to average 12-15 cents per gallon higher than last winter even without volatility
Consumers will need to purchase more fuel this winter if weather is normal
Higher prices times higher volumes equals higher bills this winter than last
