Warm US Northeast may mean blue Christmas for heating oil market. BUT...
By Gene Ramos
NEW YORK, Dec 18 (Reuters) - An unusually warm Christmas is expected for the Northeast but colder weather could come after that, spelling relief to the heating oil market where demand has stayed flat ahead of winter, forecasters said on Friday.
Winter officially begins Monday, but ''for the next 10 days, it's going to be remain pretty much above normal, potentially five to 10 degrees above the usual,'' said forecaster Mike Palmerino of Lexington, Mass.,-based Weather Services Corp.
But after that, the outlook is for colder weather in the region as the effects of the La Nina phenomenon -- the cooling of sea surface temperatures in the tropical Pacific -- replace El Nino, its warm-weather cousin, Palmerino said.
Since August, the Northeastern region has experienced warmer-than-normal weather, putting it in the record books as within the upper third of warmest periods since the U.S. government started compiling weather data 104 years ago, said Patricia Viets of the National Oceanographic and Atmospheric Administration (NOAA).
And with record warmer temperatures in recent weeks, the demand for distillate stocks, which consist mostly of heating oil, has remained tepid. The Northeast is the largest U.S. heating oil market.
During the last week of November, the ''implied demand'' for distillates was calculated at about 3.2 million barrels per day (bpd). Three weeks later, the demand barely inched up to 3.6 million bpd.
Added to the low demand, prices have remained cheap because of a long-standing inventory stockbuild. As of Dec. 11, U.S. distillate stocks stood at 151.9 million barrels, some 17.2 million barrels above their levels a year ago.
On Friday, the January heating oil futures contract, traded on the New York Mercantile Exchange, settled at 32.39 cents a gallon, unchanged from Thursday's close.
''Heating oil dealers in the Northeast are hurting, with low prices and demand that is anywhere between 20 (percent) to 35 percent lower,'' said David Taylor, a climatologist at WSC.
Major heating oil-consuming cities in the Northeast have seen a marked decrease in heating degree-days this year, he said. In Boston, the heating degree-days were down 20 percent while they were down 26 percent in New York and down 23 percent in Philadelphia,, he said.
A heating degree-day is a measure of the coldness of the weather, based on the extent to which the daily mean temperature falls below 65 degrees Fahrenheit. A heating degree day is calculated by taking the difference of the daily average temperature and 65 degrees.
The Northeast is experiencing almost a reverse of weather from last year, when it started out very cold in the autumn and warmed up in December and January, Taylor said. February and March of 1998 still turned out to be very warm, with very little snow.
But for the coming months, the changing weather pattern could produce a chilly or La Nina winter, Palmerino said.
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