# Presentation: 753710

## EIA Outlook for U.S. Heating Fuels

- State Heating Oil and Propane Program Conference
- North Falmouth, Massachusetts

**Laurie Falter**
- Industry Economist
- Energy Information Administration
- August 7, 2006

## Over the next year...

- Tight upstream and downstream refining capacity means there will be little slack in the supply lines if there is a supply disruption.
- As a result, geopolitical concerns (Iran, Nigeria, Israel-Lebanon, Venezuela, Iraq) will continue to worry the market.
- At this early juncture, it appears that fuel supplies should remain adequate for the coming winter, but prices will be high.
- Global and domestic demand will remain strong, continuing to grow despite high prices.

## Crude Oil Prices Likely to Remain Above $70 Through 2006

**Crude Oil Prices Likely to Remain Above $70 Through 2006**

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, July 2006. **

## U.S. Crude Inventories Expected to be on High End of Normal Range, but with Lower Forward Cover

**Sources: EIA, Short-Term Energy Outlook, July 2006**

**History**

**Million Barrels**

## Crude Oil OutlookConclusions

**U.S. and global oil inventories look high, but on a forward cover basis, they are not as robust. **
**WTI prices expected to stay strong due to fundamentals and limited spare capacity**
**There is potential for price spikes due to supply disruptions caused by events such as hurricane damage or geopolitical strife.**
**U.S. Gulf Coast infrastructure is still recovering from Hurricanes Katrina and Rita, with some capacity still off-line. **

## Winter Crude Oil and Distillate Price Outlook 

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, July 2006.**

**Residential**
**Heating Oil**

**Wholesale**
**Distillate**

**Crude Oil **
**(WTI)**

## Distillate Winter Demand Expected to Continue to Grow

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, July 2006.**

## Distillate Production Ramps Up Ahead of Peak Demand Season

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, July 2006.**

## Strong Crack Spreads Encourage High Refinery Production

**Source: EIA calculations from Reuters spot prices. **

## Distillate Net Imports Should Be About Average Range This Winter 

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, July 2006.**

## Trans-Atlantic Arbitrage Usually Opens for Distillates by November

**Source: EIA calculations from Reuters spot prices.**

## Distillate Stocks Expected to be in Normal Range This Winter, But Forward Cover Will Decline

**Distillate Stocks Expected to be in Normal Range This Winter, But Forward Cover Will Decline**

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, July 2006.**

**Actual**

**Forecast**

**Forward Cover**

***NOTE: Colored band is the normal inventory range.***

## New England Heating Oil Inventories are Above Average through the End of July

**New England Heating Oil Inventories are Above Average through the End of July**

**Monthly**

**Source: Energy Information Administration.**

**Weekly**

## Central Atlantic Heating Oil Inventories are also Above Average

**Central Atlantic Heating Oil Inventories are also Above Average**

**Monthly**

**Source: Energy Information Administration.**

**Weekly**

## Consumer Prices and Expenditures – Heating Oil (Northeast)

|  | 2003-2004 | 2004-2005 | 2005-2006 | 2006-
2007 |
| --- | --- | --- | --- | --- |
|  | Actual | Actual
 | Actual
 | Forecast (est.) |
| Consumption (gals.) | 642 | 642 | 589 | 633 |
| Average Price | $1.46 | $1.93 | $2.44 | $2.50 |
| Expenditures | $935 | $1,237 | $1,438 | $1,580 |

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, July 2006.**

## Heating Oil OutlookConclusion

- Distillate stocks are expected to be on the high end of the normal range this winter.
- However, demand is expected to be strong, given normal temperatures, and forward cover will fall sooner and lower this year than the past year.
- Residential heating oil prices are expected to be about 6 cents per gallon higher this year than last year.
- Higher expected consumption and prices will boost expenditures by over $140 per household this winter.

## Crude Oil, Natural Gas, and Propane Price Outlook 

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, July 2006.**

**Residential**
**Propane**

**Natural Gas (Wellhead)**

**Crude Oil **
**(WTI)**

## U.S. Propane Stocks Expected to Remain in the Lower Half of the Average Range This Winter

**Actual**

**Forecast**

**Source: EIA Short Term Energy Outlook, July 2006**

***NOTE: Colored band is the normal inventory range.***

## East Coast Propane Stocks Expected to be Relatively Comfortable this Winter

**Actual**

**Forecast**

***NOTE: Colored band is the normal inventory range.***

**Source: EIA Short Term Energy Outlook, July 2006**

## Midwest Propane Stocks Expected to be at or Above the Average Range this Winter

**Actual**

**Forecast**

***NOTE: Colored band is the normal inventory range.***

**Source: EIA Short Term Energy Outlook, July 2006**

## Gulf Coast Propane Stocks Expected to Remain Low this Winter 

**Actual**

**Forecast**

***NOTE: Colored band is the normal inventory range.***

**Source: EIA Short Term Energy Outlook, July 2006**

## Consumer Prices and Expenditures – Propane (Midwest)

|  | 2003-2004 | 2004-2005 | 2005-2006 | 2006-2007 |
| --- | --- | --- | --- | --- |
|  | Actual | Actual
 | Actual
 | Forecast (est.) |
| Consumption (gals.) | 796 | 787 | 749 | 807 |
| Average Price | $1.20 | $1.42 | $1.67 | $1.73 |
| Expenditures | $951 | $1,114 | $1,247 | $1,395 |

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, July 2006.**

## Propane OutlookConclusion

- U.S. inventories likely to remain in the middle of the historic average range, although regionally the situation is mixed
- Propane prices are expected to be about 6 cents/gallon higher this winter
- Residential consumption is expected to be somewhat higher than last winter, given normal temperatures
- Higher expected consumption and prices will boost expenditures by almost $150 per household this winter.

## Crude Oil and Gasoline Price Outlook 

**Regular Gasoline**

**Wholesale**
**Gasoline**

**Crude Oil **
**(WTI)**

**Sources: History:  EIA;  Projections: Short-Term Energy Outlook, July 2006.**

## U.S. Gasoline Inventories Are Typical, But Demand Growth Puts Forward Cover Relatively Lower

**U.S. Gasoline Inventories Are Typical, But Demand Growth Puts Forward Cover Relatively Lower**

**Source: EIA, Short Term Energy Outlook, July 2006.**

**Source: EIA, Short Term Energy Outlook, July .**

## Gasoline OutlookConclusion

- U.S. inventories are expected to be on the high end of the historic average range, with forward cover about the same as last winter
- Gasoline prices should soften this winter when demand is normally lower
- Strong crude oil prices will put a floor under gasoline prices

## Laurie Falter

- Energy Information Administration
- Office of Oil & Gas, Petroleum Division
- Laurie.Falter@eia.doe.gov
- (202) 586-1805
- http://www.eia.doe.gov/