eia short-term energy and winter fuels outlook - national

www.eia.govU.S. Energy Information Administration Independent Statistics & Analysis

EIA Short-Term Energy and Winter Fuels Outlook

forNational Association of State Energy OfficialsOctober 10, 2012 | Washington, DC

byAdam Sieminski, Administrator

Heating fuel market shares vary regionally

2

Source: EIA Short-Term Energy Outlook, October 2012

DC

Number of homes by primary space heating fuel and Census Region, winter 2012-13

Northeast

South

Midwest

West

U.S. total115 million homes

natural gas

propaneheating oilelectricity

woodkerosene/other/no heating

Short-Term Energy and Winter Fuels OutlookOctober 10, 2012

U.S. current population-weightedheating degree-days

The U.S. winter 2012-13 heating season forecast is about 2% warmer than the 30-year average, but 18% colder than last winter

0

200

400

600

800

1,000

Oct Nov Dec Jan Feb Mar

2009-2010 2010-2011 2011-2012 2012-2013 (NOAA forecast)

3Short-Term Energy and Winter Fuels OutlookOctober 10, 2012

Note: Horizontal bars indicate monthly average degree days over the period 1971-2000.Source: EIA calculations based on NOAA state history and forecasts (August 15, 2012) weighted by same-year populations.

Expenditures are expected to increase this winter (October 1– March 31) for all fossil fuels

Percent change in fuel bills from last winter (forecast)

Fuel billBase case

forecastIf 10% warmer than forecast

If 10% colder than forecast

Heating oil 19 7 32

Natural gas 15 3 28

Propane * 13 - -

Electricity 5 2 11

* Propane expenditures are a volume-weighted average of the Northeast and Midwest regions. All others are U.S. volume-weighted averages. Propane prices in warm and cold cases are not available.



EIA expects residential natural gas prices to closely follow last winter’s prices

0

5

10

15

20

25

Jan 2008 Jan 2009 Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014

Winter Residential price

Henry Hub spot price

ForecastHistorydollars per thousand cubic feet (mcf)

5



EIA expects residential heating oil prices to average 2% higher this winter than last

0

1

2

3

4

5

Jan 2008 Jan 2009 Jan 2010 Jan 2011 Jan 2012 Jan 2013

Winter Home heating oil retail price

Brent crude oil spot price

dollars per gallon

Forecast

Home heating oil retail price includes taxes.

6



Heating oil remains much more expensive than natural gas

0

5

10

15

20

25

30

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

natural gas heating oil

7

U.S. average residential winter heating fuel pricesdollars per million Btu

forecasthistory

Winter (October - March)



Recent changes in the heating oil market

8Short-Term Energy and Winter Fuels Outlook October 10, 2012

U.S. distillate stocks are at the low end of the normal range

0

20

40

60

80

100

120

140

160

180

200

2010 2011 2012 2013 2014

million barrels Forecast

10% colder

Base case10% warmer

Note: Normal range (colored band) represents the range between the minimum to maximum from Jan. 2007 to Dec. 2011.

9


History


Distillate inventories in the Northeast have been below their normal range since mid-summer

0

10

20

30

40

50

60

70

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2012 2011 5 year average

U.S. Northeast Total Distillate Inventoriesmillion barrels

Source: EIA Weekly Petroleum Status Report


Ultra-low sulfur diesel (ULSD) stocks are also low

0

2

4

6

8

10

12

14

16

18

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2012 2011 5 year average

U.S. Northeast ULSD inventoriesmillion barrels

Source: EIA Weekly Petroleum Status Report


Futures market indicates a reduced incentive to hold inventories

-6

-5

-4

-3

-2

-1

0

1

2

3

4

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

2012 2007-2011 Average

backwardation: incentive to sell out of inventory

contango: incentive to hold inventory

Time spreads for NYMEX heating oil futures contractscents per gallon

Source: Bloomberg LP

Note: Data are the average monthly first - third contract


Arbitrage between New York Harbor and Europe has closed

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

favors shipments to New York from Europe

favors shipments to Europe from New York

Transatlantic Distillate Arbitrage: New York Harbor - Northwest Europe cents per gallon (five year average)

Source: Bloomberg LP


Other factors that could lessen tightness in Northeastern distillate markets headed into the winter


• Delta Air Line’s Trainer Refinery near Philadelphia is slated to restart in early October after being idle for the last year

• Colonial Pipeline’s completion of a 55,000 bbl/d capacity expansion of a distillate pipeline from Houston, Texas and the 60,000 bbl/d expansion from a pipeline from Greensboro, North Carolina

• Additional production could come online from other Northeast refineries to take advantage of the strength in the distillate market

Changes in Northeast heating fuel consumption


• The Northeastern heating oil market is declining, though it remains the primary fuel in some areas

• Connecticut announced a plan to expand natural gas distribution networks

• Consumers are also supplementing liquid heating fuels with wood and electricity –wood pellet use has been growing in New England

• Production from shale gas in Pennsylvania has increased access to natural gas in Northeastern markets

Secondary heating is most prevalent for homes using heating oil or Propane/LPG as their main heating source

0%

5%

10%

15%

20%

25%

30%

35%

natural gas propane fuel oil electricityMain heating source

electricitywoodnatural gas

Secondary heating source

percent of households

Source: EIA Residential Energy Consumption Data, 2009


Short-Term Energy and Winter Fuels Outlook October 10, 2012

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eia short-term energy and winter fuels outlook - national

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