www.fueloilnews.com | FUEL OIL NEWS | JANUARY 2015 15
nance, operational issues with a crude
pipeline that supplies Ohio refineries
caused unplanned reductions in crude
runs at some facilities in late October.
This year's seasonal reduction in runs
occurred a few weeks later than in
recent years and was larger because of
the higher summer utilization rates.
Midwest distillate inventory patterns
typically reflect the annual cycle of har-
vest demand and refinery maintenance,
but the impact was more pronounced
this year, because the two overlapped.
This year's seasonal stock draw started
off in line with recent years and the
five-year average. But in late October,
the combination of a very large, late
harvest and late season refinery main-
tenance drove distillate inventories
below the five-year range.
In addition to in-region refinery
production of distillate, the Midwest is
typically supplied with distillate from
other U.S. regions, primarily the Gulf
Coast (PADD 3). When Midwest sup-
plies are tight, as has been the case since
October, spot ULSD prices in Chicago
move above those on the Gulf Coast,
prompting northbound shipments on
petroleum product pipelines connect-
ing the two regions.
The early onset of low temperatures
also affected Midwest distillate supply.
ULSD, the most widely used distil-
late fuel for transportation and farm
use, must be winterized for use in
very cold temperatures. Winterization
ensures that distillate fuel will flow at
cold temperatures and can be accom-
plished by blending ULSD with kero-
sene or No. 1 diesel fuel, or chemi-
cal additives. Typically, winterized
ULSD is not needed until the coldest
months of January and February, and
as a result kerosene and winterization
additives are not stocked until then.
This year, because cold temperatures
arrived early and suddenly, there have
been shortages of kerosene that have
translated into shortages of winter-
grade ULSD.
With the corn harvest almost co
mplete, distillate demand should
decline, and with refinery mainte-
nance concluding, distillate produc-
tion is already increasing. As a result,
Midwest distillate inventories have
begun to increase as well.
