Diesel, Heating Oil Stockpiles Tumble in Survey on Exports: Energy Markets

U.S. supplies of distillate fuel, a category that includes heating oil and diesel, probably dropped for a fifth week as distributors took deliveries before winter and exports to Europe increased, a Bloomberg News survey showed.

Stockpiles fell 1.5 million barrels, or 0.9 percent, in the seven days ended Oct. 22 from 170.1 million a week earlier, according to the median of 16 analyst estimates before an Energy Department report tomorrow. That would leave inventories at the lowest level since the week ended July 23. All of the respondents forecast a decline.

The drop in supplies is helping to push up heating oil prices, which have doubled since touching a three-year low of $1.1252 a gallon on March 11, 2009, as consumption rebounded. Distillate demand, as measured by the amount supplied to wholesalers and distributors, climbed 6.8 percent to 3.95 million barrels a day in the week ended Oct. 15, the highest level since May, as a strike crimped French fuel production.

“You’ve got both the normal seasonal factors and more cargoes going overseas,” said Michael Fitzpatrick, a broker with MF Global in New York, who forecast a 1.1 million-barrel drop. “The preparation for winter is probably the more important of the two factors.”

Heating oil for November delivery declined 0.5 cent to settle at $2.25 a gallon on the New York Mercantile Exchange.

Heating-Oil Cost

U.S. homeowners who use heating oil will spend an average $2,124 this winter, up 11 percent from $1,906 a year earlier, according to the Energy Department’s monthly Short-Term Energy Outlook, released on Oct. 13. The cost per gallon will average $3.06 this heating season, up 23 cents from the prior year.

Heating oil warms 7 percent of homes nationwide and 30 percent of households in the Northeast. That region is responsible for 80 percent of the nation’s residential heating- oil consumption.

About one quarter of France’s 12,300 filling stations had no gasoline yesterday. Workers at ports, refineries and fuel suppliers walked off the job to protest President Nicolas Sarkozy’s plan to increase the retirement age to 62 from 60.

Employees at three French oil refineries voted to return to work yesterday. France’s eight remaining active refineries are either on strike or shut because of a lack of crude oil. A 12th is mothballed.

Diesel, which powers 77 percent of cars sold in France, is the fuel with the tightest supply, Alexandre de Benoist, head of the Independent Fuel Importers Union, or UIP, said on Oct. 18.

“There should be good export demand for U.S. distillate supplies because of what’s happening in France,” said Addison Armstrong, director of market research at Tradition Energy, a Stamford, Connecticut-based procurement adviser.

Surging Exports

U.S. distillate fuel exports climbed to a record annual rate of 587,000 barrels a day in 2009, according to the Energy Department. That was more than five-times the level of five years earlier. The Netherlands, Chile and Mexico were the biggest customers of U.S. distillate fuel last year. Exports began to mushroom in 2008 when China bolstered supplies before the Beijing Olympics.

Eight tankers were booked so far this month to ship fuel cargoes from the U.S. Gulf of Mexico coast to Northwestern Europe, according to Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker. They are carrying 348,000 barrels of fuel. Typically fuel tankers take diesel and heating oil to Europe from the U.S. and return with gasoline.

Distillate Inventories

“The U.S. is becoming an increasingly important source for distillate supplies,” said Phil Flynn, vice president of research at PFGBest in Chicago, who projected that stockpiles fell 3 million barrels. “There are signs that exports to Europe are picking up.”

Distillate fuel inventories in the week ended Aug. 20 were the highest since 1983.

Refineries operated at 81.9 percent of capacity in the week ended Oct. 8, the lowest level since March, the Energy Department reported. Companies idle units for maintenance in autumn, when gasoline consumption declines and winter heating- oil demand has yet to gain.

“We still have plentiful supplies of distillate fuel,” Flynn said. “Since refineries are in the midst of maintenance our exports will come out of storage.”

Refineries operated at 82.8 percent of capacity last week, up 0.3 percentage point from the previous week, according to the Bloomberg survey.

Oil Supplies

Crude-oil inventories rose 1 million barrels, or 0.3 percent, from 361.2 million a week earlier, the survey showed. A gain of that size would leave stockpiles at the highest level since June 25. Fifteen respondents gave crude oil estimates. Twelve analysts forecast an increase and three predicted a drop.

“Crude oil is a seasonal story,” Armstrong said. “Refineries are still performing maintenance and demand has yet to pick up.”

Gasoline stockpiles climbed by 625,000 barrels, or 0.3 percent, from 219.3 million, the survey showed. It would be the second straight weekly advance. Ten of the respondents projected an expansion, five a decline and one said there was no change.

The department is scheduled to release its weekly report at 10:30 a.m. tomorrow in Washington.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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