Monday, January 4, 2010

Cold Weather Heats Up the Oil Market

Heating oil demand is a key seasonal factor influencing oil prices.  Large markets for heating oil exist in Western Europe, the Northeast and Midwest US, and Northeast Asia (Korea and Japan particularly). 

The northern hemisphere Winter heating season runs from November through March with demand peaking in January.

The 2009/2010 heating oil season started out relatively mild.  The following three charts are the temperature deviations from historical norms for each of the significant heating regions for the three month period September 2009 through November 2009 (click on the charts to enlarge).




Since the beginning of December 2009 temperatures deviated from normal to become much colder in Europe and Northeast Asia (click to enlarge):



Temperatures in the US deviated quite strongly to colder than normal over the past week which lent support to oil prices and pushed the market above US$80 per barrel (click to enlarge):


The US National Weather Service (NWS) is also predicting the next 6 to 10 days (January 4 through January 10-14, 2010) to be colder than normal in the US Northeast and Midwest (click chart to enlarge):


(source of charts used in this post: US National Weather Service)