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 | OCTOBER 2016 17 lars to pull it out of the ground you'll still keep producing at forty dollars a barrel," he said. But with U.S. production becoming less profitable "easy access to money to go out and find new places to drill dried up very, very quickly because those aren't great investments anymore," Baratz said. Oil companies and firms are buying up land leases and oil production leases in the Gulf of Mexico—"buying cheap," Baratz said. "There are fire sales going on." Those with the lowest oil production costs—Saudi Arabia, Iran, Iraq—are "game to fight it out in this context," Baratz said, while Venezuela spirals into a dire state. "That's become a very danger- ous place to live or to try to do business because the petrodollars aren't there to support everything," Baratz observed. Amid a supply glut, "there is no doubt that the market is looking for a rebal- ancing," Baratz said. When that might happen is uncertain, Baratz said, though many analysts and authors of research reports are forecasting that it is six to 18 months away. T h e E n e r g y I n f o r m a t i o n Administration said in its Sept. 7 Short- Term Energy Outlook, "Although the pace of inventory builds is slowing, continuing builds and high inventory levels will likely contribute to Brent prices maintaining the recent $40/b t o $ 5 0 / b t r a d i n g r a n g e d u r i n g t h e next two quarters." The EIA forecasts Brent prices to average $45/b during the fourth quarter of 2016 and first quarter of 2017, while "acknowledging that global economic developments and geopolitical events in the coming months have the potential to push oil prices near the top or bottom of the $40/b to $50/b range." Average West Texas Intermediate crude oil prices are forecast to be $1/b lower than Brent prices in 2016 and 2017, according to the Outlook. "The slight price discount of WTI to Brent in the forecast is based on the assumption of competition between the two crudes in the U.S. Gulf Coast refinery market," the EIA said. PROPANE Stocks of propane are approaching the highest level they've been in the last five years, noted Levine. A drawdown—and the extent of a drawdown—will depend largely on weather, including "the possi- bility of a La Nina event" that would bring cold temperatures, Levine said. "It is weather-dependent," Baratz said of the propane market. But he added that even if the winter turns out mild, resi- dential uses of propane for heating water, drying clothes and for cooking create a base level of demand. l F O N HEATING SEASON FUELS Outlook 2016 –2017