Drowning in oil

Global equities were pummeled again over the last twenty four hours. The EMI Global Equity Index declined by 1.44 percent with the year to date loss widening to 11.6 percent. After strong selling in Asia overnight the selling has continued into the European bourses and the U.S. equity futures markets. China remains at the bottom of the performance board with a 15.9 percent year to date loss. Six of the ten bourses in the Index are now showing double digit losses for 2016 and we are only in the third trading week of the year. Global equities have been a negative price directional driver for the oil complex for all of 2016 so far.

The winter to date is still running warmer than normal even as the current weather pattern has shifted to winter like weather over major parts of the US but projected to moderate in another week or so. The winter heating season continues to evolve with NOAA recently (Dec 17) forecasting a warmer than normal second half (Jan-Mar) winter season in the regions of the US that consume the majority of the heating oil (east coast).

The following table summarizes the population weighted heating degree days for the total US and weighted for HO customers. The table shows the average monthly level for last year (2014/2015 heating season) along with the heating season to date and projections for the current week and for the month of January. As shown on the table the season to date (through Jan 16) is running about 25.4 percent below normal for the total US and about 27.6 percent warmer than normal weighted for HO customers.

The projection for the current week ending on Jan 23 is slightly bullish with HDD expected to come in slightly colder than normal and colder than last year and the previous week. With more than half of the official heating season now in the history books the remaining half of the winter is going to have to be exceptionally cold to make up for the lost demand from the first half of the winter.

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