Oil demand lift from icy weather not a sure thing

Bob Tippee
Editor

Shouldn’t a cold Northern Hemisphere winter give oil demand, struggling to recover from recessionary doldrums, a huge lift? Maybe not.

Yes, heating oil users have been burning more of the fuel than they would have in warmer weather. But the effect on total demand is muted.

The International Energy Agency’s Oil Market Report for February points out that heating oil consumption patterns are changing in the developed nations of the Organization for Economic Cooperation and Development (OECD).

“The share of oil for heating and power generation in the OECD has been shrinking uninterruptedly over the past decade,” IEA explains. “Other energy sources, notably natural gas, renewables, and nuclear power, are becoming the fuels of choice for both purposes, displacing both distillate and residual fuel oil.”

In the cold first quarter of last year, heating oil represented 9% of total OECD oil demand, IEA points out. In the early 1990s, the share was 15%. In the past 15 years, OECD first-quarter heating oil demand has fallen by a third.

“Even if first-quarter 2010 proves to be as cold as first-quarter 2009,” IEA says, “the heating oil surge—and the concomitant fall in distillate stocks—predicted by many observers is unlikely to materialize.”

A distillate drawdown would lower oil in inventory from unusually high levels, easing a downward force on oil prices.

IEA projects average OECD heating oil demand of 3.7 million b/d in the first quarter this year, 13% below the first quarter of 2009.

In its assessment of the trend underlying this outlook, IEA is not alone.

The Centre for Global Energy Studies, London, in a Feb. 3 report notes difficulties in isolating demand boosted by icy December and February from effects of the global recession. It sees early indications of a weather-related demand bump.

Overall, however, oil demand is becoming “less seasonal by the year,” CGES says.

“Indeed, these days the hurricane season in the western Atlantic can have a more pronounced effect on oil prices than a cold winter as a result of storm-induced damage to the extensive oil and gas infrastructure in the US Gulf of Mexico.”

(Online Feb. 12, 2010; author’s e-mail: bobt@ogjonline.com)

Related Articles

Contract let for Guangdong heavy oil refinery

04/10/2014 Sino-Venezuela Guangdong Petrochemical Co., a subsidiary of China National Petroleum Corp.’s (CNPC) PetroChina Co. Ltd., has let a second major con...

Construction nears for Egyptian refinery project

04/10/2014 Egyptian Refining Co. (ERC) plans to begin construction this month on its grassroots refining upgrade project to be built within the existing Mosto...

Suncor begins planned maintenance at Alberta refinery

04/08/2014

Suncor Energy Inc. has started planned maintenance at its 142,000-b/d refinery in Edmonton, Alta.

Moody’s: Global refining, marketing industry to see earnings rise this year

04/07/2014 The global refining and marketing industry will continue to see pockets of earnings growth over the next year, but flat conditions overall, with pr...

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected