All Energy News
Mon, 20 Nov 2000, 10:44pm EST
11/20 16:24
Heating Fuel Prices Rise on Forecasts for Colder U.S. Weather
By Mark Shenk
New York, Nov. 20 (Bloomberg) -- Natural gas rose to a record and heating oil moved close to its highest price since 1979 on forecasts for colder-than-normal U.S. weather at a time of low inventories of the heating fuels.
Temperatures from the Rocky Mountains to the Atlantic Coast will be below normal through Friday, forecasters said. Cold weather now reduces the chance that inventories will increase. Natural gas supplies are down 9 percent from a year ago and heating oil stockpiles are down 31 percent.
``We could see a real supply crisis in some pockets if this cold continues,'' said Jeffrey Foose, managing director of structured products trading at Public Service Energy Resources, a division of Public Service Enterprise Group Inc., parent company to New Jersey's largest utility.
Natural gas for December delivery rose 14.9 cents, or 2.4 percent, to close at $6.249 per million British thermal units on the New York Mercantile Exchange after reaching $6.395, the highest price in 10 years of trading on the exchange. Prices have risen 39 percent this month on expectations that the cold spell would force homeowners to crank up their furnaces.
Heating oil for December delivery rose 1.74 cents, or 1.6 percent, to $1.0962 a gallon on the Nymex, close to a 21-year high of $1.11 set on Oct. 12. Prices are up about 60 percent from a year ago.
Temperatures throughout the U.S. Northeast, the largest heating oil market, will be 10 degrees to 15 degrees Fahrenheit below normal from Wednesday to Friday, Lexington, Massachusetts- based forecaster Weather Services Corp. said.
Contributing to today's gain in natural gas prices was increased demand from California power producers, which were running gas-fired generators to compensate for outages at two of the region's nuclear power plants, analysts said.
Cold Next Week
The weather will stay cold in the eastern half of the U.S. all next week, the National Weather Service predicted yesterday.
``The cold weather forecast is going further out than it was'' last week, said Jim Van Alen, an energy analyst with Janney Montgomery Scott LLC in Philadelphia.
U.S. homeowners will pay 44 percent more for heating gas this winter than last season because of higher prices and colder weather, the U.S. Energy Department said last month. Heating oil bills will be 25 percent higher.
``A lot of people were betting (winter) would be a non-event like the last years,'' PSEG's Foose said. ``We played all year in anticipation of this but for end users, the prices will be a shock.''
U.S. inventories of natural gas total 2.742 trillion cubic feet, the American Gas Association said in a weekly report last Wednesday. Gas inventories fell for the first time since April, the report said. Natural gas accounts for about 70 percent of the residential heating in the U.S., according to the Energy Department.
Higher Prices Possible
A lingering cold spell could send January futures up as much as $1 from current levels, said Pat Strange, vice president of gas trading and marketing at the wholesale group of Reliant Energy Inc. in Houston, whose company owns utilities that serve about 4 million customers in six states.
U.S. heating oil supplies fell by 665,000 barrels to 46.8 million barrels during the week ended Nov. 10, according to the American Petroleum Institute's weekly report last Tuesday.
Contributing to the low heating oil inventories this year were federal regulations that require U.S.-flagged tankers to deliver oil that travels between U.S. ports.
``A lot of heating oil produced in the Gulf of Mexico has gone to Europe because the right ships weren't available to get it to the Northeast,'' said Marianne Kah, chief economist at Conoco Inc., the fourth-largest U.S. oil company. ``Refiners would rather ship in to the Northeast because it's more economical than shipping across the Atlantic.''
Gasoil Climbs
In London, gasoil for December delivery, representing European heating oil, rose $13, or 4.2 percent, to $322.75 a metric ton on the International Petroleum Exchange. Prices have gained almost 50 percent in the past year.
World crude oil production now exceeds demand by 1.8 million barrels a day, according to the International Energy Agency, which monitors oil markets for 25 industrialized nations.
Still, the dearth of heating fuel supplies in the U.S. at the onset of the Northern Hemisphere's winter has kept prices high.
Officials from the U.S. and Saudi Arabia said at a weekend meeting of top oil consuming and producing nations that prices need to fall about 25 percent to around $25 a barrel. The U.S. is the world's largest energy consumer and Saudi Arabia produces the most oil.
Saudi Arabia yesterday pledged that world markets will have enough oil and that it would raise supply in case of any disruptions in output.
Crude oil for January delivery rose 19 cents to $35.22 a barrel on the Nymex. Prices are up 38 percent this year.
In London, Brent crude oil for January settlement fell 1 cent to $33.07 a barrel on the International Petroleum Exchange. Prices this year have climbed by a third.
The European Commission said high prices had cut the 11- country Euro zone's economic growth by 0.3 percentage point this year and accounted for half of the region's inflation.
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