The home heating oil industry has a long and proud history, and Fuel Oil News has been there supporting it since 1935. It is an industry that has faced many challenges during that time. In its 77th year, Fuel Oil News is doing more than just holding
Issue link: https://read.dmtmag.com/i/393307
FUELS By Keith Reid heating Season Fuels Outlook—2014 Looking a lot like last year, but with some key differences F uel Oil News interviewed several experts for their perspectives on what to expect in the coming months. Relatively good news is the prediction for fuel prices this heating season. Oil prices should be moder- ate (by recent standards), propane price spikes and supply issues are not likely to be as big an issue as last year and the weather is likely to be as cold, if not colder, this season. Competitively, natural gas is not expected to see a huge bounce upward in price, but supply issues and higher prices could very well be in order again this year. On the fuels front, FON was assisted by Alan Levine and Brian Milne. Levine is the CEO and chairman of Powershouse®, a group of seasoned energy experts and broker professionals working in partnership to meet the business goals of its customers. He is an internationally recognized expert in pricing and business practices in the energy industry. A petroleum specialist for over 40 years, Levine is a highly regarded authority on the relationship of energy futures to cash petroleum markets. Milne is the editor of Schneider Electric's MarketWire, a real- time market and news service focused on US oil product markets and relevant news and analysis, and also the editor of OilSpot, a weekly newsletter on the oil markets. For our weather update, we again went with ImpactWeather's StormWatch Manager/Meteorologist Fred Schmude. ImpactWeather is a StormGeo Company, and serves as the full-time weather department for hundreds of compa- nies around the globe. Schmude has been on the money the past two years we have included him in this outlook. As should be noted, none of the projections outlined here are set in stone—we are taking about commodity prices and weather projections, after all. The usual disclaimer about risks and uncertainties certainly applies. Those considering purchas- ing and hedging should use this as simply a starting point, and not the ending point in the decision-making process. Crude Oil The core component in the price of refined fuels centers on crude oil. The various domestic shale fields have been generat- ing considerable supplies of crude oil in addition to natural gas. In fact, U.S. production is now surpassing import volumes with help from shrinking demand. The impact has been lower prices and decreased volatility. "There is a lot of concern about demand going forward because of the poor economic reports coming out of Europe and China, despite the U.S. optimism in the economy," said Milne. "The current low for the year was $91.24, which is a sup- port point that we're likely going to pass shortly, and I do expect us to break below $90. But, I think we'll have a tough time get- ting below $85, though you could punch through and pop back up. I would say we'll be in an $85 to $95 range for the rest of the year. And that's pretty much true for Brent, the global price, which crunched through $100 for the first time since June 2013. The Ukrainian crisis has not helped as the European economies, such as Germany's, are being negatively affected. There's more supply out there, and that weaker economy for Europe is just not helping the cause until we see some price pressure." As Milne touched on, world events don't seem to be having the wild influence they used to have on prices and volatility. That is true even in the face of turmoil in energy hot spots such as the Mideast and Russia. "It seems right now that these events appear to be in a position to have more of a bearish influence, because they are just going to be hurting economies versus disrupting supply." Another likely factor in both low prices and reduced volatility is the initial impacts of the derivative reforms under the Dodd- Frank Wall Street Reform and Consumer Protection Act. "That has absolutely been something," said Levine. "[Trading] volumes are down. My customers are not affected by Dodd-Frank, but if you look at the market makers and the liquidity there is no question it has made a difference. But, not to such a degree that you can say you don't have viable markets anymore. On balance, I'm all in favor of the rules and the changes that came about. They are much more protective of the industry and the economy in general. But, sometimes it can be painful getting there." Milne generally agreed, but with some reservations. "I have talked to a variety of people over the past few months about this and some have said because there are fewer banks playing and there is less volatility, and I think there is a lot of truth there. 16 OCTOBER 2014 | FUEL OIL NEWS | www.fueloilnews.com