Heating Fuels Price Outlook
As we move into the 2013 heating season, <i>Fuel Oil News</i> contacted Brian Milne, Schneider Electric’s (Formerly Televent DTN) for his views on the heating fuels pricing front in the first quarter of 2013.
FON: Were there any surprises as this heating season shaped up?
Milne: There have been no real surprises since the fall. Prices have largely traded within the range that we thought they would. Look at the different markets: natural gas’ a lot of supply; propane’a lot of supply; and distillates supply with heating oil and diesel have been lower than usual, but demand has been weak, which has kept a cap on heating oil prices. So it’s moved largely in line with what we thought.
FON: What are the specifics on the propane front?
Milne: Propane is benefiting from all of the development in the tight formations. There are a lot more exports going out of the Houston market, and that has been supporting price, but overall the extra supply has really kept the lid on propane prices. That has limited the upside.
FON: Is there any pressure on natural gas?
Milne: With natural gas, coming out of the summer there was greater demand than anticipated because it was hot and that helped work down some of the surplus supply, but we still have an abundance of supply and that did keep natural gas prices limited on the upside for a while. But, we have gotten prices moving higher on cold-weather expectations. Some people are also linking this terrorist attack in Algeria to higher natural gas prices, but that might be a little bit of a stretch. But overall with natural gas, it is going to be difficult for them to get over $4 dollars this year unless you see a lot more demand with wells being shut in favor of oil or something to restrain production. They have been doing that, but unless you really see a dramatic drop in supply and a real surge in demand, the price is going to have a really tough time being over $4. But in the wintertime, it’s also less likely you’re going to see a drop under $3.
FON: Which brings us to heating oil