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So far in 2017, we have recorded thirteen sales and we have several more pending. Marcon ended 2016 with passing the 1,000,000BHP sold or chartered in tugs milestone with its 19th and final transaction of the year. One 5,000HP ASD tug continues to be fixed on previously arranged long-term charter in Latin America. Looking back over the past 36 years, we have averaged about 40 sales/charters per year.

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This Week in Petroleum

U.S. heating oil expenditures are expected to increase this winter but remain below recent average

A combination of forecast colder temperatures and higher heating oil prices in the United States is contributing to higher expected household heating oil expenditures during the winter heating season of 2017–18 from October 1 through March 31. According to EIA’s recently released Short-Term Energy Outlook (STEO), the average household that uses heating oil is forecast to spend about $1,460 for heating bills during winter 2017–18, up $210 (17%) from last winter’s average expenditures (Figure 1). However, household heating expenditures are forecast to be almost 15% lower than the previous five-winter average for households using heating oil. Forecast average expenditures provide a broad guide to changes compared with previous winter heating seasons, although fuel expenditures for households are highly dependent on the size and efficiency of individual homes and their heating equipment, thermostat settings, and local weather conditions.

Households in the Northeast rely on heating oil more heavily than in any other region of the United States (Figure 2). About 21% of households in the Northeast use oil for space heating, which is down from 25% of households five years ago. An increasing number of homes has switched to using natural gas and electricity for space heating. Nationwide, 5% of households use heating oil.

EIA’s STEO forecasts average U.S. household heating oil consumption to be 6% higher than last winter. The higher consumption reflects temperatures that are forecast to be close to normal (based on a 10-year rolling average). However, a return to normal temperatures this winter would be a colder winter than last year. Last winter saw much warmer-than-normal temperatures, which contributed to lower heating-related expenditures.

Residential heating oil prices are expected to average $2.66 per gallon (gal) this winter, up 25 cents/gal (10%) from last winter because of higher crude oil prices and higher heating oil margins (the price difference between wholesale heating oil and crude oil) (Figure 3).

The Brent crude oil price, which is the crude oil price most significant in determining U.S. petroleum product prices, is forecast in the STEO to average $54/barrel (b) this winter, which is $2/b (6 cents/gal) higher than last winter. EIA forecasts Brent crude oil prices to be higher than last year as a result of gradually tightening global oil market balances. Despite being higher than last winter, EIA still expects crude oil prices to remain below levels seen from 2011–14. Because forecast crude oil prices remain lower than they were during this period, residential heating oil prices are also expected to be lower. This winter’s STEO forecast price of $2.66/gal is almost 40 cents/gal lower than the average price of $3.05/gal from the previous five winters. However, crude oil prices are highly uncertain, and any deviation in crude oil prices from forecast levels would cause a similar deviation in retail heating oil prices and consumer expenditures.

For winter 2017–18, EIA expects that heating oil wholesale margins will average 41 cents/gal, which would be 14 cents/gal higher than last winter. Lower distillate fuel inventory levels, growing domestic consumption of distillate fuel, strong demand for U.S. distillate exports, and the expectation of close-to-normal temperatures this winter are expected to contribute to the higher heating oil wholesale margins.

Distillate fuel inventories, which include heating oil, totaled 35.3 million barrels on October 6 in the Northeast, which is 17.9 million barrels lower than at the same time last year and 1.8 million barrels lower than the previous five-year average for this time of year. Distillate inventories have fallen heading into this winter because of recent refinery outages along the U.S. Gulf Coast after Hurricane Harvey, coupled with strong demand as global industrial and economic activity expands.

Recent winters were reminders that weather can be unpredictable; the winters of 2013–14 and 2014–15 were generally colder than normal while the past two winters were much warmer than normal. Recognizing this potential variability, EIA’s Winter Fuels Outlook includes forecasts for scenarios where heating degree days are 10% higher (colder) or 10% lower (warmer) than forecast. In the 10% colder-than-forecast winter scenario, projected average household heating oil expenditures are $397 (32%) higher than last winter. In this case, EIA forecasts heating oil prices to be 33 cents/gal (14%) higher than last winter and consumption to be 16% higher. In the 10% warmer-than-forecast scenario, which would still be colder than last winter, projected expenditures are $57 (5%) higher than last winter. In this case, the heating oil prices are forecast to be 20 cents/gal (8%) higher than last winter and consumption 4% lower.

U.S. average regular gasoline prices decrease, diesel prices increase

The U.S. average regular gasoline retail price fell over 1 cent from the previous week to $2.49 per gallon on October 16, up 23 cents from the same time last year. The Gulf Coast price fell over five cents to $2.26 per gallon, the East Coast price fell five cents to $2.47 per gallon, the Rocky Mountain price fell nearly two cents to $2.53 per gallon, and the West Coast price fell one cent to $2.94 per gallon. The Midwest price increased over four cents to $2.38 per gallon.

The U.S. average diesel fuel price increased 1 cent to $2.79 per gallon on October 16, 31 cents higher than a year ago. The Rocky Mountain price increased three cents to $2.89 per gallon, the Midwest price increased two cents to $2.76 per gallon, the Gulf Coast price increased one cent to $2.61 per gallon, and the East Coast price increased less than one cent to $2.80 per gallon, and the West Coast price rose slightly, remaining virtually unchanged at $3.09 per gallon.

Propane inventories decrease slightly

U.S. propane stocks decreased by 0.1 million barrels last week to 78.8 million barrels as of October 13, 2017, 23.8 million barrels (23.2%) lower than a year ago. East Coast and Midwest inventories increased by 0.5 and 0.4 million barrels, respectively, while Gulf Coast and Rocky Mountain/West Coast inventories decreased by 0.9 and 0.2 million barrels, respectively. Propylene non-fuel-use inventories represented 3.7% of total propane inventories.

Residential heating oil and propane prices increase slightly

As of October 16, 2017, residential heating oil prices averaged $2.66 per gallon, nearly 1 cent per gallon more than last week and 27 cents per gallon higher than last year’s price at this time. The average wholesale heating oil price for this week is just under $1.89 per gallon, almost 6 cents per gallon more than last week and just over 20 cents per gallon higher than a year ago.

Residential propane prices averaged nearly $2.27 per gallon, just over 1 cent per gallon more than last week and 21 cents per gallon higher than a year ago. Wholesale propane prices averaged $1.03 per gallon, 1 cent per gallon more than last week and just over 35 cents per gallon higher than last year’s price.

 


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Marcon International, Inc. P.O.Box 1170, 9 NW Front Street, Coupeville, WA 98239 USA
Phone:360-678-8880 | Fax: 360-678-8890 | email info@marcon.com
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