The U.S. may be heading into winter with the lowest stockpiles of heating oil to meet surging demand in more than two decades.
Inventories of distillates — used as diesel for both transportation and heating oil — are enough to meet 31.2 days of demand, according to the Energy Information Administration. That’s the tightest it has been for this time of the year since 2000.
The dwindling supplies raise the specter of energy shortages and price spikes in the U.S. this winter — at a time when the rest of the world has already been upended by fuel shortages and blackouts. They also underscore how the economic rebound from the Covid-19 pandemic, a surge in demand for virtually all goods and an ensuing trucking boom are now colliding with volatile energy markets, threatening to raise the cost of fuel for homeowners, farmers and truckers.
Industry Insiders Warn that Winter Blackouts Across the US are Possible as US Heating Oil Supplies Lowest In Decades
Americans are hoping the energy crisis in Asia and Europe won’t spread stateside. But industry insiders warn that winter blackouts across the US are possible as low fossil fuel stockpiles may lead to shortages amid heightened demand.
The latest concern is ultra-low stockpiles of heating oil (distillate fuel oil). In the winter of 2019–2020, about 5.5 million households used heating oil as their primary heating source, and 81% of those households were in the Northeast.
Energy Information Administration (EIA) reports there are only 31.2 days of the demand for heating oil, the lowest levels since 2000.
Low stockpiles ahead of cooler weather could be problematic for consumers who may be burdened with high energy costs, or worse, fuel shortages. Below is the two-week forecast for the US Lower 48, underlining cooler weather trends are nearing and how consumers shouldn’t wait until the last minute to fill up their tanks.
Suzanne Danforth, an analyst at Wood Mackenzie Ltd., told Bloomberg low stockpiles of heating oil won’t be as severe as the gas crisis in Europe where prices went parabolic, though she warned: “It’s going to be tight, very tight.”
One of the reasons behind low supplies is due in part to the deep freeze in Texas earlier this year that paralyzed refiners and knocked out as much as 5.5 million barrels a day of processing capacity, causing a tremendous drawdown of diesel inventories.
Inventories continued tightening through the year as a surge in truck drivers was seen to transport goods across the country. There’s also been a rise in jet fuel demand as travel rebounded, and let’s not forget farmers’ increasing diesel demand during harvest. The timing of refiners shutting down for maintenance could amplify the tightness.
Wood Mackenzie’s Danforth said refiners should come back online in November and December and return to “full diesel mode” that would begin to alleviate the market in early 2022.
Compound low heating oil supplies with low propane supplies with low coal supplies, and it appears an energy crunch is possible for the US.
Read the full article at ZeroHedge News.