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www.fueloilnews.com | FUEL OIL NEWS | FEBRUARY 2014 17 For the upside, to get over $100 will be tough. Last year the high was $112 and I just don't think we'll see that. However, geopolitical events still matter. FON: What do you expect with heating oil/diesel prices as we enter late spring and then move into summer? Milne: With all the export demand and so much cold we are still trading below $3. There's a lot of supply and the ULSD market has evolved to the extent that the market is reflecting more transportation fuel than heating fuel. When you have the cold and more demand for heating you tend to have less commercial traffic moving or you have flights canceled, and as a result that kinds of limits [the upside]. In April we got to $2.72, and I just don't see breaking that. And, you would expect diesel to be lower, but part of what helps [support prices] is a lower supply base compared to historical levels and the exports supporting the higher price. And now we see the U.S. economy is stronger than we thought it would be at this point, and it seems to be picking up its pace and diesel prices should stay strong. But as we come out of the heating season, just as with last April, you could see prices test the low area. But I think the downside is going to be limited, and if you go below that I don't think it has any durability. For the upside the $3.25 and $3.20 area is really the target, and you can get there if the economy continues building strongly, and exports stay strong and the global economy is strong. But it's going to be chal- lenging. The center of gravity would be the $2.95 to $3.05 area. Levine: Historically, the best time for a heating oil dealer to hedge is in the first quarter of the year and we see nothing in the market to change that now. So, we would be looking, maybe, for a test down to around $2.82. I do not think it's out of the question that between now and March 1 we would see numbers down in that range, and if we do that would bring winter down to roughly $2.75. If that's the case, then I would jump on it. FON: What do you expect with propane prices as we enter late spring and then move into summer? Rieg: Record export volumes (due to the recent expansions of the Gulf Coast loading docks and international prices well above US prices), late and robust agriculture demand, low US inventories (58% vs 2013 and 75% vs. 5 year average), normal CHEM propane use for the winter season, severe winter weather pockets, and pipeline, rail and truck availability issues have led to regional propane shortages. Crestwood is developing a 2.5 million barrel propane storage cavern in Finger Lakes, N.Y., to alleviate Northeast product shortfalls in the winter months, but is currently awaiting regulatory approval to begin construction. The Hub prices — Conway and Belvieu — have gone up dramatically since October and we are seeing basis blowouts in the Ohio Valley, Northeast, and Southeast regions. With the factors mentioned above being bullish, we anticipate prices holding at these current levels and may go up some from here until winter is over. The forward curve through the summer does foresee prices 20-30 cents lower than current prices. So if the fundamentals of the propane market can turn a little bearish, maybe we can make a move back to the $1 range in the middle of the year but other outside factors such as crude and natural gas prices have to subside also. Levine: Propane prices have moved up to around a $1.30 or so and they are starting to back away now. I think the issues with propane are more distributional than actual inventory or supply, particularly in the Northeast. A customer of mine in Maine recently told me that his propane supplier asked, because my customer had multiple sources of supply, to be let out of his supply agreement because he had other customers that had to rely upon him exclusively and [he needed to make sure he could] supply them. Milne: Propane is tight. In the middle of this freeze 17 states have relaxed the hours of service for oil and propane delivery drivers. This has been an interesting year. The export demand has really shot up, and you can factor in the late harvest, that was wet, and the cold weather in December that drew down supplies and really created these pockets of shortages and now we've had this intense cold. The market has changed a bit and now you see supply being By Keith Reid Fuels In our fall Outlook, StormWatch Manager/ M e t e o r o l o g i s t F r e d S c h m u d e w i t h ImpactWeather, predicted the winter in the Northeast and Mid-Atlantic should be colder than average this year and in line with the types of winters we used to experience in the mid-to late-1970s. ImpactWeather is a StormGeo Company, and serves as the full-time weather department for hundreds of compa- nies around the globe, empowering them to make the smartest business decisions possible when faced with weather-related challenges. Schmude seems to have been pretty close to the mark. So what does he expect for the remainder of this winter? "Driving the weather we've experienced this winter has been abnormally warm water tem- perature south of Alaska," Schmude said. "This has created a higher pressure developing in the upper atmosphere, which can deflect the jet stream more north to south than west to east. Between February and March I do not see much of a change. I would expect colder than normal weather and potentially more major storms out in the Northeast. This could even extend into April. Temperatures in the Northwest should be a little bit above normal." Weather Outlook for the Remainder of Winter