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www.fueloilnews.com | FUEL OIL NEWS | DECEMBER 2016 13 Distillate fuel supplies, which include heating oil, are also ample heading into the winter heating season for the second straight year. At the same time that consumption of distillate fuel is slowing, refinery output of distillate fuel has been relatively high. This combination of high refinery runs and lower demand has resulted high inventory levels in the northeast United States. Relatively strong gasoline refining margins during the past two summers have encouraged high refinery runs both in the United States and abroad. This has led to the coproduction of distillate fuel with gasoline, despite lower margins for distillate fuel than were seen during much of the previous decade. Slowing economic growth in emerging economies, which have been major drivers of distillate consumption in past years, has reduced global consumption growth for distillate fuel. In the United States, distillate inventory levels were high heading into last winter, and warmer-than-normal winter temperatures contributed to inventories remaining well above five-year aver- age levels throughout last winter. In addition to weak space heating demand, overall distillate consumption has fallen in 2016 because of reduced oil and natural gas drilling (which uses diesel fuel in its operations), and because of declining coal production, which has reduced diesel use in rail shipments of coal. Distillate stocks in the Northeast totaled 52.3 million barrels on September 30, nearly 7 million barrels higher than at the same time last year. The September 30 inventory level reflected a small decline from the previous week, when Northeast distillate stock levels were the highest since 2010. High stock levels should limit price volatility in the event of colder-than expected temperatures. However, if temperatures become severely cold, the Northeast typically turns to imports for supply, and prices have the poten- tial to rise to encourage imports to be shipped to the region. Nearly 5% of all U.S. households heat primarily with pro- pane. EIA expects these households to spend less on heating this winter than in eight out of the past ten winters, but more than last winter, when both heating demand and propane prices were low. The projected increase in expenditures from last winter varies by region. EIA expects that households heat- ing with propane in the Midwest will spend an average of $290 (30%) more this winter than last winter, reflecting prices that are about 14% higher and consumption that is 13% higher than last winter. Households in the Northeast are expected to spend an average of $346 (21%) more this winter, with aver- age prices that are about 7% higher and consumption that is 13% higher than last winter. However, average propane expenditures across the two regions are 18% below average expenditures from the five winters prior to last winter. Propane inventories, which were at record-high levels throughout last winter, are going into this heating season at even higher levels. U.S. inventories of propane reached 104.0 million barrels as of September 30, almost 4 million barrels (4%) higher than at the same time last year. Last winter, inventories of pro- pane were drawn down by 33.8 million barrels during the heating season (October-March). An inventory draw of 40.6 million barrels is expected this winter. The projected draw would leave inventories 32% above the previous five-year average at the end of the heating season in March. Current inventory levels should be sufficient to allow for even stronger-than-projected inventory Heating Oil 38% 23% 56% Natural Gas 22% 12% 31% Propane* 26% 6% 49% Electricity 5% 2% 9% Base case forecast If 10% warmer than forecast If 10% colder than forecast *Propane expenditures are a volume-weighted average of the Northeast and Midwest regions. All others are U.S. volume-weighted averages. Propane prices do not reflect prices locked in before the winter heating season. PERCENT CHANGE IN FUEL BILLS FROM LAST WINTER (FORECAST) Source: EIA Winter Fuels Outlook