U.S. Says Has Enough Heating Oil for East Coast Updated 11:50 AM ET October 19, 2000 By David Ljunggren OTTAWA (Reuters) - U.S. Energy Secretary Bill Richardson said on Thursday Washington believed it had enough heating oil stocks to avert supply problems on the East Coast this winter.

Heating oil stocks in the U.S. Northeast -- the biggest regional user of the fuel -- are 70 percent below last year, while national inventories are off 36 percent.

Analysts say the squeeze has contributed to the spike in world crude oil prices. NYMEX heating oil futures last week touched their highest level for nearly 20 years as traders locked in supplies ahead of winter.

But Richardson played down fears of disruption, saying the government was confident it had done enough to ensure the situation remained stable.

"We believe our home heating oil distillates will be sufficiently stocked to avert a problem this winter in the East Coast of the United States," he told reporters after a meeting with Canadian counterpart Ralph Goodale.

"We've got the oil moving already, it's ahead of schedule and we believe with the help of Canada as a secure supplier that our potential disruption problems in the East Coast will be averted this winter."

The federal government has urged consumers and businesses to fill their heating tanks and sign supply contracts early to lock in heating fuel prices. Prices are expected to rise as much as 40 percent this winter compared with last year.

Canada is now the single largest supplier of heating oil to the United States but its refineries are running at close to full capacity.

Richardson also repeated comments he made on Wednesday to the effect that he did not believe more oil would need to be released from the U.S. Strategic Petroleum Reserve (SPR) to ease tight oil supplies.

Analysts say last month's release of 30 million barrels from the SPR -- which initially cut crude prices some seven dollars to nearly $30 a barrel -- has done little to improve availability of heating oil.

"The United States feels the use of the reserve should be precautionary, should be very limited. We saw it as a potential emergency with low stocks of home heating. We don't anticipate using it again but ultimately the president makes that decision," Richardson said.

"Right now I think the president's efforts with cease-fire in the Middle East and other measures, other constructive statements by OPEC countries have stabilized the price of oil a little bit. But it's still too high."

Producer cartel OPEC has agreed to increase crude supplies by 800,000 barrels per day from October 1 but analysts say many producers are currently running at full capacity and are unable to increase output.

"I am going to be in touch with OPEC countries soon," Richardson said, but gave no details.

Richardson and Goodale also agreed to resume bilateral talks on natural gas in November, when they will discuss the merits of developing massive Alaskan or Canadian Arctic natural gas fields and a multibillion-dollar pipeline.

Richardson also said the United States looked forward to working more with Canada in the areas of auto fuel efficiency and carbon sequestration fuel cells.

http://news.excite.com/news/r/001019/11/news-energy-us-oil-col

-- Martin Thompson (mthom1927@aol.com), October 19, 2000

Answers

Can anyone make any sense out of this? The Northeast has 70 per cent less heating oil but there is enough supply for this winter. Am I missing something here?

-- Martin Thompson (mthom1927@aol.com), October 19, 2000.

""Can anyone make any sense out of this? The Northeast has 70 per cent less heating oil but there is enough supply for this winter. Am I missing something here?""

There is one point that is not being discussed much. Each winter, about 80% or so of the heating oil consumed, is made after the start of the heating season. The stocks in reserve (going into the winter) get things going -- but -- do not supply the bulk of HO used. The question is -- IMO -- are the low reserves in place now going to be too low? IOW -- will production during the winter be too far behind reserve stock use to catch up as demand grows. The answer to this -- in good part -- is weather. If the weather predictions for a "normal winter" mean far more cold than the unusually warm winters we have had the last 3 years, then shortages will be most likely. However, one cannot be sure. Also, since the bulk of HO is produced during the heating season, will normal refinery maintenance NOT done mean excess breakdowns -- AND -- therefore even worse "unforeseen" shortages. It's a crap shoot at best, and I don't think the rhetoric by the DOE, and the administration, is much more than pre-election platitudes. Frankly, I don't think they care if their words now mean all WILL be OK, just that people believe them before November 7th.

JB

-- Jackson Brown (Jackson_Brown@deja.com), October 20, 2000.