• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 18 hours How Far Have We Really Gotten With Alternative Energy
  • 2 days The United States produced more crude oil than any nation, at any time.
  • 1 day China deletes leaked stats showing plunging birth rate for 2023
  • 2 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 7 days Bad news for e-cars keeps coming
Equinor Fights NIMBY Feelings in New York Battery Storage Project

Equinor Fights NIMBY Feelings in New York Battery Storage Project

Equinor's proposed battery storage facility…

From Fantasy to Fact: The EV Slowdown Gets Real

From Fantasy to Fact: The EV Slowdown Gets Real

Despite significant efforts and investments,…

How EVs Could Provide Renewable Energy Storage To Support the Grid

How EVs Could Provide Renewable Energy Storage To Support the Grid

Bidirectional charging technology allows electric…



The leading economics blog online covering financial issues, geopolitics and trading.

More Info

Premium Content

Heating Oil And Diesel Stocks Dwindle While Demand Climbs

  • Oil prices have yet another reason to remain elevated as cold winter weather and refiners struggle to keep up with the rising demand for heating oil and diesel.
  • Heating oil hit $2.83 per gallon, its highest price in seven years, as harsh winter storms affected large portions of the country.
  • Demand for heating oil should drop off as winter comes to an end, but if oil prices remain high then fuel prices will still remain elevated.

Supplies of diesel and heating oil in the United States have dwindled as refiners are having trouble replenishing the domestic fuel supply this winter, which may keep oil prices elevated for months.

Heating oil futures reached $2.83 per gallon at the market’s close on Feb. 4, the highest price in seven years. U.S. and global benchmarks for crude-oil futures hit above $90 a barrel, as a harsh winter storm affected large portions of the country, adding to existing supply concerns.

The latest national average price for diesel was at $3.78 per gallon, the highest since September 2014. Fuel production in the United States has not kept up with demand for months with East Coast stockpiles at their lowest levels since April 2020.

When inventories are low, refiners generally respond by ramping up output, but several key U.S. refineries have been out of action since the start of the pandemic, while others are under maintenance.

Many of the operational refineries are currently producing less output to avoid producing too much jet fuel, where demand still lags below 2019 levels. Global refining capacity shrank by more than 2 million barrels per day during the pandemic, while U.S. refining capacity last year fell 4.5 percent to 18.1 million barrels per day (bpd).

Demand for diesel, heating oil, and other related products has been running 5 percent higher than pre-pandemic levels, putting inventories at 15 percent less than the five-year moving average, according to data from the U.S. Energy Information Administration.

Stronger than expected demand is a key reason why fuel prices are expected to reach pre-2020 levels by mid-year at the latest. Increased fuel costs may remain an ongoing theme for the time being, as oil companies are finding it difficult to react to tightened supply situations.

The weather has boosted demand for natural gas, as fuel stocks are being tested by frigid temperatures throughout much of the United States, which is expected to persist through next week. “The latest upswing was triggered by a cold snap in Texas, which is fueling concerns about production outages in the Permian Basin, the largest U.S. shale play,” said Carsten Fritsch, a commodity analyst at Commerzbank.

“A year ago, a period of extreme cold weather had caused massive disruptions to oil production there,” said Fritsch, referring to a crippling storm last year that left 4 million in Texas without power.

About 350,000 homes and businesses in states such as Tennessee, Arkansas, and Texas were without power as of Feb. 4, due to a winter storm that brought freezing rain and snow.

Related: Putin And Xi Blast American “Antagonism” In Joint Statement

Some power companies in states facing severe weather are preparing to use more distillate oil to meet demand.

In New England, oil-fired generation is expected to surge temporarily in the coming days, which could raise prices more.

Meanwhile, the Organization of the Petroleum Exporting Countries and its allies on Feb. 2, stuck with its plan to boost global production by another 400,000 barrels a day in March.

However, OPEC member states have been unable to produce oil at their assigned quota levels, which will not alleviate the global supply-demand deficit.

Prices should ease as winter subsidies and demand for heating fuel drops off, allowing inventories to restock, but if the cost of crude oil used to make distillates remains high, fuel prices might remain elevated.


Low distillate inventories have pushed the market into backwardation, as current prices have been pushed higher than expected future prices. This has led several major oil traders to see little financial incentive to store extra diesel and many are choosing not to renew their long-term storage contracts.

Record-high natural gas prices have led European refiners to reduce production in Europe to save on cost, leading to tightened inventories. European diesel last week was boosted with a six-month spread to its widest backwardation since March 2008.

U.S. exports of distillates to the European Union have strengthened as a result of the high demand. West Texas Intermediate crude for March delivery climbed by $2.42, or 2.7 percent, to $92.69 a barrel on the New York Mercantile Exchange, with prices trading roughly 6.8 percent higher for the week.

Global benchmark, Brent crude for April, gained $2.21, or 2.4 percent, to $93.32 a barrel on the ICE Futures Exchange, while prices are poised for a weekly rise of 5.4 percent. The positive U.S. monthly jobs report was mostly supportive and upbeat in terms of the outlook for energy demand, as the nation added a robust 467,000 jobs in January.

By Bryan Jung of The Epoch Times via Zerohedge

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • George Doolittle on February 07 2022 said:
    "Winter" is pretty much over in the USA now and for most of the USA. Production and sales of pure BEV transportation in the USA continues to soar as well which will start now to directly compete with diesel fuel starting with the Rivian R1T and particularly so as "Spring like conditions" start appearing throughout the USA starting in March just a few weeks away.

    More to the point the US Class 8 Railroad Industry is beginning to transition to pure battery electric now as well as "lowering the carbon footprint" becomes US Corporate Policy with one imagines at some point true this also be true of US Government at every level.

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News