Crude Oil Remains Buoyed on Strong Heating OIl Demand
The petroleum markets continue to remain robust despite weaker than expected data which continues to show that many developed countries are growing at a clip that is slower than expected. Cold weather throughout the United States continues to buoy prices of heating oils, which have seen inventories declined to the bottom end of the 5-year range. Despite robust growth in production within the US, crude production cannot compensate for the strong demand for distillates.
The winter storms sweeping the U.S. have sent temperatures below freezing in many parts of the country and boosted the consumption of heating fuel. In its most recent report, the Energy Information Administration announced that distillate inventories had increased 8% year over year while Jet Fuel inventories climbed 5%. The increase in demand comes from colder than normal weather in January as the polar vortex increased heating demand.
The EIA estimate for distillate consumption for the United States has risen sharply over the past three weeks, averaging 4.0 million barrels per day for the three weeks ending January 24, an increase of 500,000 barrels per day from the three weeks ending January 3. In addition to increased demand from consumers that regularly use oil heat, press reports indicate that some commercial, industrial, and electricity generating customers that typically burn natural gas delivered under less-expensive non-firm contracts are turning to oil because their natural gas suppliers have exercised their interruption rights in order to serve customers with firm contracts.
Crude prices have moved higher on Wednesday ahead of the Department of Energy’s release of the inventory estimates. Tuesday’s API report showed a build in crude oil that was smaller than expected and a decline in gasoline which help buoy the complex.
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