The prices of heating oil in the Lehigh Valley continue to drop, helping homeowners and businesses save money on their heating oil bill. Oil is a commodity and like all other commodities, it is very hard to predict the future pricing. Here are a few snippets and insights as to what is going on in the industry.
“In commodity ETFs and other hard-asset ETFs, you often see share counts increasing as prices fall, because people assume oil won’t be at $75 or $80 forever,” said Matt Hougan, president of San Francisco-based research firm ETF.com. “The more demand there is for a particular ETF, eventually the more shares will have to be created to meet that demand.”
WTI for December delivery fell $2.97 to $74.21 a barrel on the New York Mercantile Exchange today, the lowest settlement since Sept. 21, 2010.
Crude output in the U.S. is the highest in three decades and OPEC is producing the most in more than a year, while global demand growth is forecast to slow.
The U.S. Energy Information Administration said yesterday that WTI will average $83.42 a barrel next year, down from last month’s estimate of $101.67. Consumption around the world will be 92.5 million barrels a day, from 92.71 million forecast in October. (source: The Washington Post with Bloomburg)
The downward pricing that consumers are experiencing is related to several factors but the biggest one highlighted in the the above quote have to do with basic supply and demand forces of economics. There is a slowing trend on the demand side of the equation and an increase in supply for the United States and OPEC. This all translates to low heating oil prices in the Lehigh Valley for this heating season.
Natural Gas Customers are Facing Some Not So Good News
Conversely, we are seeing an increase in the pricing of natural gas. Unfortunately, homeowners in Pennsylvania that heating their homes with natural gas systems are facing a heating this year that may prove to be more expensive than last year, based upon long range weather forecasts and natural gas futures.
Natural gas futures rose the most in four months on predictions for unusually cold weather that would stoke demand for the heating fuel and reduce stockpiles.
Forecasts turned colder over the weekend, with below-normal temperatures blanketing the eastern half of the U.S. from Nov. 8 through Nov. 17, according to MDA Weather. By the end of last winter, the coldest since 1982 based on heating demand, gas inventories were a record 55 percent below average after beginning the season at a small surplus. Gas jumped to $6.493 per million British thermal units on Feb. 24, a five-year high.
“The forecasts are reinforcing the risk of what could happen to stockpiles during the winter,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Traders are a little leery, given what happened last year.”
Natural gas for December delivery rose 17.3 cents, or 4.5 percent, to $4.046 per million Btu on the New York Mercantile Exchange, the highest settlement since Sept. 30 and biggest one-day gain since June 12. Volume for all futures traded was 67 percent above the 100-day average at 2:41 p.m. Prices dropped to $3.541 on Oct. 28, the lowest since last November, before ending last week up 6.9 percent.
“The market is rebalancing after reaching an 11-month low,” McGillian said. “It’s inevitable that traders on the short side of the market would start to get cold feet as it gets closer to winter.” (source: Bloomburg.com)
Basic supply and demand forces are at play with natural gas, just as with heating oil. The above article snippet suggests that supply side of the equation highlights record low supply levels as being the driving force behind increasing natural gas prices. The article continues on, further highlighting the supply and demand issues in the natural gas market:
Gas stockpiles were 8.2 percent below the five-year average in the week ended Oct. 24, the biggest deficit for the time of year since at least 2005. Inventories totaled 3.48 trillion cubic feet as of Oct. 24, compared with 3.774 trillion the same time last year, EIA data show.
Gas demand may rise 1.6 percent to average 72.5 billion cubic feet a day this year, with the industrial sector leading growth, the agency said Oct. 7 in its monthly Short-Term Energy Outlook report. (source: Bloomburg.com)
Regardless of the heating source, consumers can look to save money on this year’s energy consumption by taking advantage of a few basic energy saving steps. For example, having the gas or oil heating system serviced and maintained by a qualified heating system company will help to keep the heating system operating at its optimal efficiency level. Also, utilizing thermostats that have programming capable of adjust the inside temperature up or down based on usage levels. There is not sense in heating homes at 70 degrees during daytime hours if its occupants are elsewhere. Dropping the temperatures are night time, while everyone is sleeping is another cost saving tip. For more information on energy saving tips, check out one of our earlier articles, “Tips For Home Heating Efficiency And Saving Money This Winter“