OPIS Alert -

2000-02-09 12:35:57 EST

***EFFORT TO CREATE HEATING OIL RESERVE TAKES FLIGHT

A movement to create a northeastern heating oil inventory reserve is beginning to take shape in New England and Middle Atlantic markets.

Energy department officials are meeting with northeastern oil suppliers and other industry groups today, but Connecticut Senator Christopher Dodd is already preparing legislation that would establish a reserve for the region.

Sources say that the democratic senator will offer legislation that would create a 2-million bbl reserve that could be tapped when supplies get strained or when prices spike like they have in the last four weeks. Dodd's senate bill is similar to legislation introduced by Representative John Larson (D-Conn.) earlier this week.

It's not known where the 2-million bbl of heating oil would be stored, but sources have suggested some underutilized storage on Staten Island and on the New Jersey waterfront. Sources assume that the storage would be dedicated solely to high sulfur heating oil- - emergency diesel supplies would have to come from traditional sources.

There is also an effort to store heating oil at salt caverns in the Gulf Coast which are now used to house crude in the Strategic Petroleum Reserve. Northeastern senators recently called for the sale of crude from the stockpiled reserves, but suppliers say that would have little impact on downstream refined products markets, since oil would have to be pumped, refined, and shipped to distant markets.

Critics of the Connecticut legislators' efforts say that a 2-million bbl reserve might not be enough to turn the tide against a price spike. Latest API data showed East Coast stocks of distillate at 32-million bbl, some 34-million bbl below last year.

Tom Kloza, tkloza@opisnet.com

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So, crude oil, which would have to be pumped, refined and shipped to distant markets is not an appropriate solution to a heating oil crunch. However, storing heating oil in salt caverns on the Gulf Coast, which would have to be pumped, I assume cleansed, and then shipped to distant markets is some kind of an answer? Why would you pour a refined product back into a salt cavery?

Also thinking that the market (in particular residential use) for high sulfur heating oil would be extremely limited.

And do I understand east coast stocks of distillates to be down by 50%?

-- Brooks (brooksbie@hotmail.com), February 09, 2000

Answers

Brooks.. They've got to do something. Doesn't necessarily have to make sense. " Just do it !

-- kevin (innxxs@yahoo.com), February 09, 2000.