Heating oil prices got a boost Tuesday as the second powerful storm in four days threatened to dump more than 30 centimetres of snow on the U.S. East Coast.
The storm was expected to drop about as much snow in parts of the Midwest before making its way to the big heating-oil consuming states in the Mid-Atlantic and New York by Tuesday afternoon and evening. As much as half a metre of snow us expected in Washington.
Parts of the Mid-Atlantic region were buried with nearly a metre of snow over the weekend.
Coupled with forecasts for colder-than-normal temperatures through at least mid-February, demand for heating oil will continue to be as strong as it has been for much of the winter.
Wholesale heating oil prices rose 5.18 cents to settle at US$1.9373 per gallon on the New York Mercantile Exchange Tuesday.
Eventually, that jump in prices could result in higher retail prices as people in the Northeast, who consume 80 per cent of the heating oil used in the U.S., likely will need to fill up their tanks one more time before spring arrives.
Still, some analysts were surprised that prices did not move even higher.
"Given the strong weather, implied demand and lack of refining capacity, you would think heating oil would be stronger at this point," oil analyst and trader Stephen Schork said.
Refiners have been cutting production along the East Coast for months because of continued soft demand for energy.
The U.S. average for retail heating oil prices was $2.867 per gallon last week, nearly 50 cents higher than a year ago, according to the Energy Information Administration.
But heating oil's influence on energy markets has been waning for years. The number of U.S. homes heated with oil has dropped to seven per cent in 2008 from 32 per cent in 1960. Consumption of heating oil for residential customers is about half of what it was 20 years ago, according to EIA records.
More people are switching to natural gas, but even there prices have remained steady despite heavy demand. Natural gas prices fell 11.1 cents per 1,000 cubic feet to settle at $5.290 on the Nymex.
Huge amounts of gas in storage, strong production and imports have helped keep prices stable, said Chris McGill of the American Gas Association. "The supply picture has been pretty robust," he said.
Retail gasoline prices in the United States fell 0.8 cents overnight to a national average of $2.644 per gallon, according to AAA, Wright Express and Oil Price Information Service. Prices are 9.9 cents lower than a month ago, but still 72 cents higher than year-ago levels.
In Canada, the price of gas at the pump averaged 99.7 cents Canadian per litre, down from $1.016 per litre a month ago, according to price-watching website GasBuddy.com.
Crude oil prices moved higher for the second straight day, in part because of the weather. Benchmark crude for March delivery jumped $1.86 to settle at $73.75 a barrel.
In other Nymex trading in March contracts, gasoline added 3.5 cents at settle at $1.9290 a gallon.
In London, Brent crude gained $2.02 to settle at $72.13 on the ICE futures exchange.
Associated Press writers Pablo Gorondi in Budapest and Chun Han Wong in Singapore contributed to this report.