Slide 12 of 24
Notes:
The price spike that initiated the flood of distillate imports last winter can be easily seen in this chart.
The distillate supply/demand balance influences the spread between spot distillate and spot crude oil prices. For example, when stocks are higher than normal, the spread will be lower than usual. This spread is the price incentive that encourages or discourages changes in supply.
The January/February 2000 price spike was shorter than the one last winter, largely due to the timing. Since last winter’s price spike occurred early in the season, it took some time before prices receded substantially.
Currently, the distillate fuel refining spread (the difference between the spot heating oil price and the WTI price) is more “typical”. But as was seen last year, a tightness in the market will be reflected first in spot prices, making the spot price an excellent leading indicator.
