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Cold Temps Spur Fuel Switching in Northeast

EIA Energy Manage

The severely cold temperatures entrenched over the northeast United States in recent weeks are affecting the heating oil market in the region for both residential and commercial customers, according to the Energy Information Administration.

As temperatures have dropped, prices for heating oil in the Northeast have risen, with spot prices for heating oil in New York Harbor on January 28 at $3.17 per gallon (gal), 17 cents/gal higher than at the beginning of 2014. Demand for heating oil has outpaced supply during January’s cold snaps, resulting in a drawdown of stocks.

The EIA estimate for distillate consumption (a category which includes heating oil) for the United States has risen sharply over the past three weeks, averaging 4.0 million barrels per day (bbl/d) for the three weeks ending January 24, an increase of 500,000 bbl/d from the three weeks ending January 3.

In addition to increased demand from consumers that regularly use oil heat, press reports indicate that some commercial, industrial, and electricity generating customers that typically burn natural gas delivered under less-expensive non-firm contracts are turning to oil because their natural gas suppliers have exercised their interruption rights in order to serve customers with firm contracts.

Interruptible customers often use heating oil or residual fuel oil as a backup fuel for space heating. This fuel switching is creating incremental demand for heating oil.

Washington Gas reported that this January has been so cold that a total of seven days this month have made the list of its highest 25 ever natural gas usage days.

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