November 8, 2018 / 7:50 PM / 8 days ago

Fuel providers warn about heating supplies on cold weather outlook

NEW YORK (Reuters) - Headed into the winter, temperatures have been colder than usual in the United States, and the cost of heating has been higher - a trend likely to be extended in the next couple of months.

A woman walks through the snow during a winter nor'easter storm in the Brooklyn borough of New York, U.S., March 21, 2018. REUTERS/Brendan McDermid

That has fuel companies already warning about supply. Some heating oil service companies have rushed to deliver fuel earlier this season, while natural gas utilities are firing up emergency plans in case demand skyrockets and as more people look to switch to the cheaper fuel.

Heating oil costs, particularly in the U.S. Northeast, are expected to hit four-year highs this winter. That’s driving consumers to request switching to cheaper natural gas, but that’s worrying utilities who say there will not be enough pipelines to handle demand in subsequent cold seasons.

Households burning fuel oil can expect to pay an average of $1,589 this winter, or $213 more than last year, up 15.5 percent, according to the U.S. Energy Department. That will hit households in the U.S. Northeast hardest, since over 80 percent of the homes burning oil for heat are located there.

That’s lit a fire under East Coast fuel providers, who have ramped up heating oil deliveries and services earlier than last year.

“This is unexpected demand due to weather,” said Chris Fazio, executive vice president at Approved Oil, a Brooklyn, New York-based fuel delivery company. “It’s been a pretty good shot to the arm.”

At Approved Oil, sales were about 15,000 barrels a day in recent weeks, compared with just 6,000 barrels a day in October last year, said Fazio. Consumers are expected to use an average of 501.9 gallons of heating oil this winter, the most since 2014-2015, EIA said.

For a graphic on heating oil futures, see: tmsnrt.rs/2RHCXcJ

Heating oil prices hit four-year seasonal highs - tmsnrt.rs/2DaLGQH

By contrast, U.S. homes using natural gas in the Northeast are expected to pay just $727 this winter, down 2.1 percent from last year, even as homes in the region are projected to burn 0.5 percent more fuel this year than last with temperatures forecast to be about 0.8 percent colder than last year.

That price tag is still higher than the national forecasted average of $598 this winter and it is driving more requests for customers to switch to natural gas. Companies have warned that capacity of the pipes supplying gas to New York City and New England has not kept up with growing demand.

“We continue to see an increase in demand from oil to gas conversions and new construction and anticipate the need for additional capacity to meet demand in time for the winter of 2020/2021,” said Karen Young, a spokeswoman for National Grid Plc, which supplies 3.6 million customers in New York and New England.

In recent years, New York state has blocked several new pipelines, including Williams Cos Inc’s Northeast Supply Enhancement and Constitution projects, from entering the state.

Consolidated Edison Inc, which supplies power and gas in New York City and its suburbs, this year adopted energy efficiency programs and a “demand response” plan to incentivize consumers to reduce gas use on peak days.

The company told New York state regulators in a recent filing that it may need to impose “a temporary moratorium” on new gas customers due to limited space on existing pipelines.

Con Edison’s incentive programs will help maintain service but they “do not eliminate the need for a new natural gas pipeline to keep up with our region’s energy needs,” said Marc Huestis, senior vice president of gas operations.

Reporting by Stephanie Kelly and Scott DiSavino; Editing by Susan Thomas

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