Updated October 20, 2009
Oil Heat Market Outlook: Crude oil has broken out of the trading range of $65 to $75 per barrel that it has been in for the past 4 months and has moved higher. Just three weeks ago (Sept.28) it was poised for a move down, but since then the dollar has weakened against the Euro and the Yen, and as a result oil has moved into a new range of $75-$85 per barrel. What is downright frustrating for me is that the fundamental supply and demand picture of both Crude and Heating Oil argue strongly against any move up. Right now the story of oil pricing is that when the dollar moves up in value, oil and stock prices decline and when the dollar drops in value, oil and equity markets move up.
One thing is clear: the current supply and demand of heating oil has virtually nothing to do with the recent strength in prices.
|
 |
| photo by A.J. Marro Copyright 2009 Rutland Herald |
|
|
According to the Department of Energy, demand is down: 10.5% for distillate (including heating oil), 6.7% for jet fuel, and a less than 1% for gasoline. Supplies for heating oil are way up, with more distillate and crude oil in the country than we have had in the last 25 years. Particularly remarkable about this is that refinery utilization is quite low (80.5%). This means we have a surplus of oil even when our refineries aren't maximizing production.
Demand for commodity futures from Hedge Funds, Global Banks, and even individual investors continues to put strong upward pressure on prices. These are the "speculators" we hear so much about. They are hoping to cash in on the chance of strong economic activity in the near term and are flooding the market, driving up prices while looking to make a fast buck. Set against this is the most bearish inventory data I have ever seen. Sooner or later supply and demand should wash these speculators out. Unfortunately this hasn't happened yet.
|
At Rutland Fuel Co., we are winding down our fixed-price offerings for the 2009-2010 heating season. If you have not locked in, take heart in the fact that supplies are 17% above average and that prices should have a natural ceiling because of that. Also prices should have a ceiling due to how slow economic activity is in the Northeast and Atlantic Coast regions. We will have fixed-price prepays available until November 6, 2009.
|
|
The Rutland Fuel Company has a variety of programs
available for those who wish to approach the coming heating season with
a strategy. We would be happy to discuss these programs with you
personally. Call us at (802)773-7400 or stop by our office for a chat.
|
Why Choose Rutland Fuel: In times like these it is important you choose a fuel supplier you can trust. As oil has whipsawed up and down during the past 24 months we have remained on a solid financial footing because I run these programs the right way: I lock into oil only for those who lock in with me. We don't speculate, rather we hedge our programs as diligently as possible. For fixed-price plans we purchase heating oil futures contracts and for CAP plans we purchase call options. I think what sets us apart is that we offer our fixed and CAP programs for much longer than most other oil dealers. The truth is that no one really knows where oil prices are going next, so I don't want my customers to have only a six-week window in the summer to set their price for the coming year. Instead, prepay customers can lock into some as early as springtime, and price out the rest later (during summer/into the fall) to average in their cost. For those who prefer to jump in all at once, they have a period of many months to decide when the time is right for them. And we offer discount programs for those who do not wish to lock in a fixed price for the winter season. We strive to maintain flexibility in our offers while protecting those who lock in, by covering their needs almost simultaneously when they lock in.
|
|
|
