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The Heat Is On - Is the U.S. Northeast in for a Supply-Challenged, High-Price Heating Season?

Just as homeowners in parts of the Northeast are thinking about turning on the heat again, the market for heating oil, diesel and other middle distillates in PADD 1 is unusually tight. Inventories are hovering near their five-year lows; prices are up sharply; and the near-term prospects for rebuilding stocks are modest at best. For one thing, the import-dependent region can’t rely on them as much as it used to; for another, at least a couple of in-region and nearby Canadian refineries the Northeast counts on are offline for major turnarounds. In today’s RBN blog, we discuss the latest developments in PADD 1’s distillates market.

Houstonians may still be enjoying — enduring? — daytime temperatures in the 90s and nighttime temps in the low 70s, but many folks in the northern third of the U.S. have already turned off the AC and started those inevitable spousal discussions about when they should turn on the heat. (According to one study, women, on average, would set the thermostat at 77 degrees, while men prefer 71 — we will not be taking sides or making judgments in this blog.) As shown in Figure 1, less than 5% of U.S. households use heating oil, but the near-twin of ultra-low sulfur diesel (ULSD) is used by more than 10% of the homes in most of the Northeast (gold-, orange- and burgundy-shaded states) — in New England, heating oil’s share ranges from 24% in Massachusetts to a staggering 59% in Maine.

Heating Oil’s Share of Home-Heating Market

Figure 1. Heating Oil’s Share of Home-Heating Market. Sources: EIA, U.S. Census Bureau

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