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
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www.fueloilnews.com | FUEL OIL NEWS | FEBRUARY 2016 27 my view to be buying next winter. As a result I'm counseling my customers to wait until probably May or June before they consider looking at next season, which is not what I would ordinarily be doing. I would normally be telling them to buy right now." Sprague offered the following hedg- ing advice: The extended price decline of recent months only underscores the importance of thoughtful and balanced hedging strategies. Going into the sum- mer, relatively low forward heating oil prices gave few retailers the urgency to consider downside protection. While fur- ther price decline seemed like a long-shot at the time, recent months have proven once again that there is no predicting what markets may do. Once again, the best strategy for retailers is to as closely match what is being bought to what is being sold. Selling retail cap programs with corresponding downside protection reduces risk. PROPANE The propane outlook offers more of the same i n t o t h e i m m e d i a t e future. "This is another com- modity where inventories are through the roof," Levine said. "From a technical point of view we have been at the $0.37 to $0.38 range basis spot futures for sev- eral weeks and we're out of crop drying season so I think the demand situation is less than attractive for propane and I would not be surprised to see spot pro- pane move as low as $0.30. Looking a bit down the road, propane supply dynamics in the domestic market are less certain." "The propane market continues to exist in an oversupplied position in the United States. However, most of the excess is sitting in the Gulf waiting on export opportunity," said Bob Troop, AMERIgreen's director of propane. "With the startup of the new Panama Canal, it is expected to reduce transpor- tation to the Far East. Thus the surplus could find itself under pressure from potential exports. "Here in the U.S., gas directed drilling activity has declined to less than half of what it was last year. There is concern about reduced production of propane, as natural gas wells are the source of most of the new production. "As long as we continue to see inven- tories remain above their five-year averages, propane should maintain its relative low cost. Oil prices, demand and export activities could of course rapidly change this forecast." NATURAL GAS W h e r e n a t u r a l g a s i s concerned, there is gen- erally more of the same. "Natural gas storage inventories are at record levels going into the heating season, w e l l a b o v e t h e f i v e - y e a r a v e r a g e , " said Bob Reicher, AMERIgreen direc- t o r o f n a t u r a l g a s . " W i t h a w a r m December, inventories remain high. The NYMEX NG contracts have also been soft in comparison to previous years. The futures contracts for the next 12 months are averaging $2.444 with a low of $2.22 for Feb 2016 and a high of $2.812 for Jan 2017. If we have normal temperatures for the remainder of this winter, we should come out of the winter with above average levels of gas in storage. We should see prices staying in this current trading range plus or minus 20% barring any unusual variations in demand." Levine is a bit more bullish on natural gas than most of the other fuels discussed. "Natural gas seems to be somewhat different," said Levine. Technically you can see the possibility of a bottom being formed. Our natural gas business is good and guys are coming in and buying this stuff at these prices. I would guess that we probably have a bottom in the mar- ket and I would look for some degree of strength to reemerge as we move toward March and spring." Levine noted that natural gas produc- ers are benefiting from the same financial institution optimism that is currently helping support investment in the oil shale plays. Fuel Oil News is now available everywhere your schedule takes you www.fueloilnews.com JANUARY 2016 PERC Aims to Educate Consumers 20 Preview: AHR Expo 36 NORA Sets Goals for 2016 18 iPad | Mobile | Print