U.S. winter chill to bolster heating fuel demand

By Haitham Haddadin - Analysis

NEW YORK (Reuters) - Winter is shaping up to be the coldest in years for much of the United States, spelling potentially robust demand for heating oil and natural gas.

The outlook could put a floor under crude oil prices, which have dropped more than $100 since July due to an economic crisis that has slashed consumption of transportation fuels like gasoline and jet fuel.

"This will be the coldest December since 2000 on average for the U.S. on a whole and it's going to be the coldest winter population-weighted since 2004-2005," said Joe Bastardi of Pennslyvania-based forecaster Accuweather.

Americans in north-central and far northeastern states are already feeling a big chill as arctic air brings frigid temperatures near 8-12 degrees Fahrenheit that may linger over the next two weeks, forecasters said.

"We're getting a healthy start to December here," said Matt Rogers, a forecaster at Maryland-based MDA EarthSat Energy Weather, adding temperatures in Chicago and New York will be at least 10 degrees below normal this weekend.

"From a weather standpoint we will have increased heating fuel demand, but that may be offset by the demand destruction associated with the slower economic activity," he said.

The U.S. Northeast is the world's largest heating oil market while the Midwest favors natural gas.

While demand for heating fuels may be driven higher this winter, consumers could get a break on costs thanks to the dramatic slump in crude prices that has dragged down heating oil and natural gas.

Residential heating oil prices are running at $2.68 a gallon, nearly 60 cents below last year, according to the U.S. Energy Information Administration.

CHICAGO: CAPITAL OF COLD

The Midwest is seen as the epicenter of cold this month.

In an updated outlook this week, Kansas-based World Weather Inc said "winter promises to be cooler than usual over the Midwest and part of the Central Plains" and a "cooler than usual bias" is likely over much of the Mid-Atlantic states.

Snowfall will be greater than usual in the Midwest and possibly the Mid-Atlantic, added World Weather's Drew Lerner.

"Chicago looks like the capital of cold for the next few weeks in December," Accuweather's Bastardi told Reuters

"The worst will come first. December will slap you in the face in terms of cold, especially in the Midwest," he added. Bastardi sees the Windy City averaging 10 degrees below normal this month versus 2 degrees below normal in Boston.