Written on: October 19, 2015 by ICM
Heating oil prices are expected to be lower than last winter because of lower forecast crude oil prices and a relatively soft global distillate market compared with recent years. The Brent crude oil price is forecast to average $52/b this winter, which would be $13/b (32 cents per gallon) lower than last winter. Brent crude oil prices are forecast to remain below levels in recent years as the global oil market continues to experience an excess of supply to consumption. However, crude oil prices are highly uncertain, and any deviation in crude oil prices from forecast levels would cause a similar deviation in retail heating oil prices and consumer expenditures.
Distillate fuel supplies are also ample heading into the winter. Slowing economic growth in emerging economies, which have been major drivers of distillate consumption in recent years, has reduced growth in global demand for distillate fuel. Additionally, relatively strong gasoline refining margins during the past summer encouraged record-high global refinery runs. This combination of high refinery runs and slowing demand growth has resulted in high inventory levels in major distillate markets including Asia, northwest Europe, and the northeast United States. Distillate stocks in the Northeast totaled 45.1 million barrels on September 25, the highest for any week since late 2011. Reliance on heating oil is highest in the Northeast, where 23% of households use oil for space heating. Nationwide, only 5% of households use heating oil.