New Yorkers are paying record prices for heating this month as cold weather and natural gas restrictions boost demand for oil, draining supplies already at the lowest in more than two decades on the U.S. East Coast.
Residential heating oil in the state of New York surged to $4.482 a gallon on Feb. 3, the highest in data going back to 1990, according to the U.S. Energy Information Administration. Prices have risen 25.4 cents this year. Across the U.S., the fuel averaged $4.241 a gallon, also a record.
“These prices are absolutely nuts because there’s just no supply,” said Bob Castoro, 60-year-old owner of New York-based Dyno Fuel Oil, who raised prices more than 30 cents a gallon in less than three weeks. “I don’t know how my customers are going to pay their bills. It’s a choice between eating or putting heating oil in the tank to stay warm.”
East Coast stockpiles of distillates, including heating oil and diesel, plunged 2.05 million barrels to the lowest level since 1990 in the week ended Jan. 31, according to EIA data. Frigid weather led to natural gas pipeline restrictions that boosted oil consumption, while refinery maintenance cut fuel output. About 5.38 million households use oil for primary space heating in the U.S. Northeast, according to EIA data.
Castoro, like many other heating oil distributors in the Northeast, is struggling to meet customers’ needs. He’s driving two 100-mile trips each night from Brooklyn to Holtsville on Long Island, just to fill his 8,000 gallon-tank with enough inventory to keep people warm for a day.
Still, he says it’s not enough to spare his clients from soaring prices. He’s charging as much as $4.56 a gallon in eastern Suffolk County, the highest he’s ever asked, he said in a phone interview today.
U.S. households were forecast to pay about $3.77 a gallon in the 2014 winter season, down from $3.87 a gallon in 2013, according to EIA. The agency is scheduled to release an updated estimate in a report tomorrow.
“People have been waiting two to three days to get a delivery because we just can’t get enough product,” Castoro said. “We’re geared up to handle the cold weather and snow but when gas customers get cut off, our deliveries all of the sudden double and terminals don’t have the capability to keep up with demand.”
Last month was the coldest January since 1994 in the contiguous U.S., based on gas-weighted heating-degree days, a measure of energy demand, according to Commodity Weather Group LLC in Bethesda, Maryland. The U.S. Northeast is also on track for the coldest winter since 1982, measured from December to February, the group said.
U.S. consumption of distillate fuel in the four weeks ended Jan. 31 rose to 3.99 million barrels a day, the most for this time of year since 2009, EIA data show.
Companies including Spectra Energy Corp. last month limited natural gas shipments to interruptible customers in the U.S. Northeast, prompting more use of oil.
There are more than 4,000 interruptible customers in New York City, which include hospitals, commercial buildings and nursing homes, according to the New York Oil Heating Association. Those customers, whose contracts allow their suppliers to restrict deliveries, typically turn to oil as an alternative.
“Interruptibles not being able to get gas is, without a doubt, what’s pumped prices up for heating,” John Maniscalco, executive vice president of the New York-based association, said by phone on Feb. 7. “We can handle our own demand but when you add that on top, that’s when the issue arrives.”
Stockpiles in the New York Harbor, the delivery point for futures, were 13.6 million barrels, the lowest since 2003 last week, EIA data showed.
Refineries including Philadelphia Energy Solutions’ Philadelphia plant and Delta Air Lines Inc. Trainer site, both in Pennsylvania, carried out maintenance that included several units. The plants have a combined capacity of about 540,000 barrels a day, according to data compiled by Bloomberg.
That helped to send spot ultra low sulfur diesel fuel, traded as a proxy for heating oil, to a premium of 42 cents above New York Mercantile Exchange futures on Feb. 5, the highest level in data compiled by Bloomberg going back to 2006.
Diesel futures for March delivery on the Nymex added 5.52 cents to $3.0503 a gallon on Feb. 7 and touched $3.0515 today.
Casey Cota, owner and president of Cota & Cota Inc., a heating oil company servicing customers in Vermont and New Hampshire, said he’s been able to keep customers supplied because he gets product by both pipeline and rail.
Like Castoro, though, he hasn’t been able to spare clients price hikes passed on from wholesalers. He’s hoping that as the winter comes to a close, warmer weather will allow stockpiles to replenish and prices to drop to more normal levels.
“There have been increases in prices because of the expansion in heating oil differentials off of the New York Mercantile Exchange,” Cota said. “Once we see natural gas customers go off of heating oil, prices should settle down.”
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