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Refinery
Capacity Restraints, European Regulatory Issues,
High Demand for Diesel and Gasoline, and Old Man
Winter Could Have a Chilling Impact on Supply
WASHINGTON,
DC, September 22, 2004 – ICF
Consulting released a report cautioning industry and
consumers to prepare for a winter with a greater than
normal degree of volatility on heating oil supplies.
The analysis titled, U.S. Heating Oil Outlook 2004, outlines
the underlying market factors that will contribute to this
uncertainty. While the current outlook indicates that the
expected normal winter weather pattern can be managed, the
risks of significant volatility are unusually high.
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Crude oil prices have increased by more
than forty percent in the last year, leaving energy consumers
to deal with the impact of higher prices on all hydrocarbon
products, including heating oil. Heating oil spot market
prices averaged about 74 cts/gallon in September 2003, and
the current market is about $1.30/gallon, an increase of
more than 75 percent. "In
addition to dealing with higher price levels, both industry
and consumers will need to carefully monitor heating oil
supply patterns over the next few months, particularly refinery
production and import levels from Europe, to determine if
inventory builds will be adequate to ensure supply during
the dead of winter. Potential could exist for some severe
price spikes if unanticipated shortages occur during peak
demand periods," says Zeta Rosenberg, Fuels Vice President,
ICF Consulting.
Given the current forecast of a normal U.S. winter weather
degree-day pattern, heating oil supplies are sufficient under
the following conditions:
- continued strong refinery operation
in Petroleum Administration for Defense Districts (PADD)
1 and PADD 3
- imports of heating oil at historic high levels
- building heating
oil inventory in PADD 1 to at least 35 MMB by October
1, 2004
However, there are some substantive uncertainties
with the potential to create significant volatility.
The main factors that will contribute to this uncertainty
and volatility include:
- an underlying higher demand for diesel
fuel in both the U.S. and Europe
- abnormal maintenance
downtime this fall, particularly in Europe
- a refining
system in the United States rarely operating below
maximum capacity
- changing diesel sulfur specifications in Europe
- the potential
for an even harsher than normal winter in either the
United States or Europe
Early recognition of both the weather influence and the
impact of European diesel specification changes will reward
the industry participants who are prepared to act to manage
their system or take advantage of trading opportunities.
ICF Consulting’s full report is available at http://www.icfi.com/heatingoil.
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ICF International (Nasdaq: ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, environment, transportation, social programs, defense, and homeland security markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 1,800 employees serve these clients worldwide. ICF’s Web site is http://www.icfi.com.
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For Immediate Release
Contact: Douglas Beck
1.703.934.3820
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