Winter Distillate and Propane Outlook Joanne Shore Energy Information Administration State Heating...

Winter Distillate and Propane Outlook

Joanne Shore Energy Information Administration

State Heating Oil and Propane Program August 2000

Distillate Prices Increasing With Crude Oil

0

20

40

60

80

100

120

140

160

Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00

Cen

ts P

er G

allo

n

Source: Spot Prices, S&P DRI Platt's; Retail, EIA

Monthly Average Prices

Spot West Texas Intermediate

East Coast Retail On-Highway Diesel Fuel

East Coast Residential Heating Oil

Distillate Supply/Demand Balance Reflected in Spreads

0102030405060708090

100


Cen

ts P

er G

allo

n

NY Harbor Distillate - WTI Crude Oil Price

Source: DRI Platt's Spot Prices

Spot Heating Oil Price

WTI Price

Distillate Stocks are Low – Especially on the East Coast

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

Dec-98 Dec-99 Dec-00

Thou

sand

Bar

rels

East Coast Total Distillate StocksEast Coast

Actual

Normal Range

Source: EIASource: EIA

Distillate Stocks Are Important Part of East Coast Winter Supply

15% 17% 15%

28% 25% 25% 27%

49% 45% 43% 42%

13% 15% 15% 16%

10%0%

25%

50%

75%

100%

Dec Jan Feb Mar

Net Imports

Other USRegionalSupply

East CoastProduction

Stock Draw

Average East Coast Supply as Percent of Demand

Source: EIA

Warm Winters Held Heating Oil Demand Down While Diesel Grew

0

500

1000

1500

2000

2500

3000


Thou

sand

Bar

rels

Per

Day Low Sulfur

(Diesel)

HighSulfur(HeatingOil)

U.S. Product Supplied

Source: EIA

Distillate Demand Strong in December 1999

2600

2800

3000

3200

3400

3600

3800

4000Ju

l

Aug Se

p

Oct

Nov Dec Jan

Feb

Mar

Apr

May

June

Thou

sand

Bar

rels

Per

Day

Average 95-991998-991999-00Forecast

U.S. Total Distillate Product Supplied

Sources: History: EIA; Projections: Short-Term Energy Outlook, August 2000.

Dec 1999 & Jan 2000 Production Fell, But Rebounded with Price

2600

2800

3000

3200

3400

3600

3800

4000Ju

l

Aug Se

p

Oct

Nov Dec Jan

Feb

Mar

Apr

May

June

Thou

sand

Bar

rels

Per

Day


U.S. Total Distillate Production


More Supply Possible This Fall than Forecast

20%

21%

22%

23%

24%

25%

26%Ja

n-91

Jan-

92

Jan-

93

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Distillate Yields (Production/Crude Inputs)

Forecast


Unusual Net Imports May Only Be Available At A High Price

0

50

100

150

200

250

300

350

400Ju

l

Aug Se

p

Oct

Nov Dec Jan

Feb

Mar

Apr

May

June

Thou

sand

Bar

rels

Per

Day


U.S. Distillate Net Imports


80

100

120

140

160

180

Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01

Mill

ion

Bar

rels

Actual

NOTE: Colored Band is Normal Stock Range

Forecast

U.S. Total Distillate Stocks


Distillate Stocks Expected to Remain Low

Winter Crude Oil and Distillate Price Outlook

$0.00$0.20$0.40$0.60$0.80$1.00$1.20$1.40$1.60

Jan-97 Jan-98 Jan-99 Jan-00 Jan-01

$/G

allo

n

Residential Heating Oil

Wholesale Distillate

Crude Oil (WTI)

Forecast


Conclusion

Distillate stocks likely to be low going into winter

Prices likely to average as high as last winter even without volatility

Residential customers will need to purchase more fuel this winter if weather is normal

Same price times higher volumes equals higher bills this winter than last

Propane Prices Follow Crude Oil

15

35

55

75

95

115

135Ja

n-86

Jan-

87

Jan-

88

Jan-

89

Jan-

90

Jan-

91

Jan-

92

Jan-

93

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Cen

ts p

er G

allo

n

WTI Crude Propane (M. Belvieu)No. 2 (USGC) SHOPP PropanePMM Residential

Retail/Spot PricesRetail/Spot Prices

Source: S&P DRI Platt’s Spot Prices, EIA RetailSource: S&P DRI Platt’s Spot Prices, EIA Retail

Propane Demand is Highly Seasonal, But Fresh Supply is Not

0200400600800

10001200140016001800

Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00

Thou

sand

Bar

rels

Per

Day

Demand

Production& NetImports

Propane Supply & Demand

Stock Build

StockDraw

Source: EIA

Propane Sector Demand Shares

Residential&

Commercial34%

Farm8%Industrial

10%

Other3%

Internal Combustion

3%

Chemical42%

Source: 1997 Sales of NGL’s, API

U.S. Propane Demand Jan-May

0

200

400

600

800

1000

1200

1400

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Thou

sand

Bar

rels

per

Day

Source: EIA

U.S. Propane Production by Source

0

100

200

300

400

500

600

700

1986 1988 1990 1992 1994 1996 1998 2000

Thou

sand

Bar

rels

Per

Day

Refinery

Gas PlantJan-May

Source: EIA

Waterborne Imports Fall

0

50

100

150

200

250Ja

n-90

Jan-

91

Jan-

92

Jan-

93

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Thou

sand

Bar

rels

Per

Day

Canada Other

U.S. Propane Imports By Source Country

Source: EIA

Exports of Propane High in 2000

0

50

100

150

200

250Ja

n-90

Jan-

91

Jan-

92

Jan-

93

Jan-

94

Jan-

95

Jan-

96

Jan-

97

Jan-

98

Jan-

99

Jan-

00

Thou

sand

Bar

rels

Per

Day

Mexico Other

U.S. Propane Exports

Source: EIA

U.S. Propane Net Imports Jan-May

0

20

40

60

80

100

120

140

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

Thou

sand

Bar

rels

Per

Day

Source: EIA

U.S. Propane Stocks

0

10

20

30

40

50

60

70

80

90

Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01

Mill

ion

Bar

rels

Lower Operational Level 18.5 Million Barrels

Actual

Normal Range

Forecast

Source: EIA

0

5

10

15

20

25

30

35

Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00

Mill

ion

Bar

rels

Actual

Normal Range

PAD District II Stocks (Midwest)

Source: EIA

Propane Stocks Are Important Part of Midwest Winter Supply

24% 20%

49% 47% 54%72%

11% 14% 11% 11%

15% 15% 16% 17%

24%

0%

25%

50%

75%

100%

Dec Jan Feb Mar

Net Imports

Other USRegionalSupply

MidwestProduction

Stock Draw

Average Midwest Supply as Percent of Demand

Source: EIA

Conclusion Propane inventories are expected to begin

the heating season somewhat low -- especially in the Midwest

Propane supply likely to remain above prior year high co-production of propane as refineries continue to meet

strong petroleum demand high gas plant production of propane as surging crude oil prices

keep gas plant margins in positive territory. However, propane exports and demand also

may be high higher U.S. exports of propane are uncertain Residential heating demand likely to increase if weather returns

to normal following warm weather during the past two winters. Consumers will continue to pay more due to

higher world oil prices

Winter Distillate and Propane Outlook Joanne Shore Energy Information Administration State Heating...

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