Wednesday, October 20, 2004

The US fuel story just keeps getting uglier and uglier.
Crude-oil futures touched a record past $55 a barrel Wednesday after two key U.S. reports revealed declines in distillate and gasoline supplies for last week and showed that crude inventories remained below the year-ago level.

"It's a scary number for heating oil and ... refineries are suspected to be pulling from producing gasoline to increase heating-oil supplies," said John Person, head analyst at Infinity Brokerage Services. . . .

"This is supposed to be the time of year that heating supplies build in preparation for winter," said Todd Hultman, president of Dailyfutures.com, a commodity information provider. Instead, U.S. inventories of heating oil, which is part of the distillate stock figures, have dropped by almost 3 million barrels this month and are now 12 percent below year-ago levels, he said.

Demand for distillates remained above 4.2 million barrels per day for a second-straight week, according to Kloza. "Those are winter-like disappearance numbers, so the inventory count is clearly raising concern," he said, adding that on a four-week basis, distillate demand is up 4 percent from a year ago.

Summed up, "U.S. and world production are strained and it may be a very tough challenge to get through this winter without some large upward price spikes," Hultman said.
Private crude oil stocks have bounced off their mid-September low, but not by much. Crude stocks are lower now than they were in early September and 5.2% lower than this time last year.

And that's the good news. Gasoline stocks have been falling unevenly since July and are now 4.9% lower. They are particularly low on the East Coast (-9.0%), the Midwest (-8.2%) and the Rocky Mountain states (-13.1%). No wonder gasoline prices are up almost 20�/gal.

Finally, stocks of distillate fuel oil -- the stuff out of which home heating oil is made -- continue to plunge. They fell for the fifth week in a row last week and are now 7% lower than in early September. The situation is especially bad in the Midwest (-17.9%). Heating oil futures prices hit their nominal all-time high today of $1.565/gal. With this picture painted behind them, they've got nowhere to go but up.

But thankfully this isn't going to affect anybody's Christmas plans. The National Federation of Retailers says were going to spend $220bn on Christmas presents this year, +4.5% over 2003.

Yeah, I'll be getting my wife an extra 20 gallons of heating oil this year, tastefully gift-wrapped. Happy Holidays!

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