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14 OCTOBER 2016 | FUEL OIL NEWS | www.fueloilnews.com F uel inventories are plentiful going into this heating season. What does that signify for this final quarter of 2016 and the first four months of 2017? Fuel Oil News interviewed three experts for their thoughts: Philip J. Baratz, president of Angus Energy, a firm that helps companies manage fuel price volatility, and offers business consulting services and data analysis; Richard M. Larkin, president of Hedge Solutions, an energy consulting firm that provides businesses with strategies for procurement, marketing, and risk management; and Alan H. Levine, CEO and chairman of Powerhouse, a group of energy experts and broker professionals. A petroleum specialist for more than 40 years, Levine is an internation- ally recognized expert in pricing and business practices in the energy industry, and an authority on the relationship of energy futures to cash petroleum markets. All three emphasized that the market is unpredictable, and that their comments should not be used as a guide to making purchasing and hedging decisions. Fuel Oil News conducted the interviews around September 1. (Editor's note: David P. Daoust, managing director of Sprague Energy, and Shaun Kennedy, Sprague's natural gas supply manager, share their thoughts in an extra section of this article posted on FuelOilNews.com.) CRUDE OIL/DISTILLATES "I think this season is going to be very uncertain because there are a variety of factors that are work- ing into the potential for oil pricing," said Levine. "One of them, of course, is the fact that we're sitting on very large quantities of crude oil and distillate fuels. That in itself will put something of a natural limit on the upside." Levine said, "I'd be very surprised if we could move much above fifty dollars a barrel." The abundance of inven- tory is due to the fact that the U.S. has been producing very large quantities of crude oil, Levine said. Even though U.S. crude oil production has fallen by roughly one million barrels a day, "we're still producing a huge amount of supply," Levine s a i d . F u r t h e r , " d e m a n d h a s been very strong, encouraging refiners to continue to create more product," Levine said. T h e s e c i r c u m s t a n c e s a r e resulting in production of "a lot of two oil and that's a serious concern for the outlook going forward, especially in view of the fact that last winter was as warm as it was, leaving us with very large excess supply going into [this] sea- son," Levine said. "The effect is to put a damper on where prices might go." A battle for market share between OPEC and the U.S. hydraulic fracturing industry con- tinues with unabated intensity, the experts agreed. The OPEC strat- egy "of trying to produce us out of business" has had some effect, Levine said, "but I want to point out that eight and a half million barrels a day production is still a lot of production." Levine added, "The Saudis have sent somewhat mixed sig- nals in recent months. It would seem that they're a little bit more willing to have a conversation about freezing production." At least, Levine noted, "That's some- thing they said in June [at] the last OPEC meeting." The term of art the Saudis use for agreeing to reduced produc- tion is "stabilizing prices," Levine said. "It's the first time they've said that since they started this campaign to essentially kill the American oil industry. But at the same time they produced more in July than ever before. So we're getting a very confused picture on the production side with respect to the Saudis." Meanwhile, Iran is producing BY STEPHEN BENNETT HEATING SEASON FUELS Outlook 2016 –2017