ICF International Forecasts
an Uncertain and Volatile
2004 Heating Oil Season in the U.S.
September 22, 2004
In May 2004, ICF International released a report titled
U.S.
Crude Oil and Petroleum Product Outlook 2004,
which proposed our view that the world had entered
a new era of higher prices for petroleum products,
and that industry, governments, and consumers should
adjust economic and energy planning to that reality.
This reality is based on fundamental global factors
that appear to be enduring and not a phenomenon of
short-term market or political events. Based on our
previous report’s assumptions and forecasts,
which continue to be borne out in the marketplace,
this report evaluates the outlook for heating oil supply
in the upcoming winter season, in particular focusing
on the U.S. PADD 1 enclave.
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This report provides ICF International’s
winter 2004-2005 Heating Oil Outlook based
on our projected demand for gasoline and
distillates (including heating oil) , projected
supply and inventory issues, and analysis
of refining capacity and constraints. It
is our projection that the current forecast
of a "normal" U.S. winter weather
degree-day pattern is manageable through
continued strong refinery operation in
PADD 1 as well as PADD 3, imports of heating
oil at historic high levels over the period,
and building heating oil inventory in PADD
1 to at least 35 MMB by October 1. However,
we must caution that there are some substantive
uncertainties that have the potential
to create significant volatility this season.
The main factors that will contribute
to this uncertainty and volatility include:
- the possibility of a colder winter
than average (in the United States or
in Europe)
- a
more uncertain European import market
based on new refinery regulations there
- possible arbitrage opportunities for
U.S. export to Europe
- any unexpected
disruptions in PADD 1 or PADD 3 refineries
Any
fluctuations in current projections in
these market conditions could quickly
lead to a shortage of heating oil that
cannot be quickly resolved. Even if average
supplies are sufficient, short-term constraints
caused by severe weather or other market
disruptions are likely to cause shortages
and price spikes. Early recognition
of these sensitivities will reward the
industry participants who are prepared
to act to manage their system or take advantage
of trading opportunities.
Download full report on U.S.
Heating Oil Outlook 2004: PADD 1
Learn more about ICF International's fuel consulting services. For inquiries and brochures, contact us at energy@icfi.com or 1.703.934.3637.
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