THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, February 6, 1996 TAG: 9602060308
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: STAFF AND WIRE REPORT
LENGTH: Medium: 84 lines
Nightly temperatures in the teens and 20s have had furnaces running full blast during the past few days, but the deep freeze won't send Hampton Roads heating oil prices through the roof.
Heating oil prices paid by many households and businesses shot up about 10 cents a gallon earlier in the heating season as a cold snap sent demand for oil soaring. This time around, anxious homeowners who waited for oil delivery trucks to run the icy streets won't see prices ratchet up above the current level of roughly $1 a gallon.
Prices might even edge down with the prospect of Iraqi oil gushing onto the market and if temperatures, as expected, quickly return to normal in the Midwest and on the East Coast.
``We've been pretty stable price-wise right through this mess,'' said Billy Thomas, consultant for Johns Brothers Inc. of Norfolk, which supplies about 5,000 Hampton Roads households with oil. ``They (prices) spiked locally because of the weather here and in the Northeast, but they took a nice plunge today.''
The plunge occurred on the oil futures market, where traders figure moderate temperatures in the next few weeks will diminish demand and that Iraqi oil will increase supply.
Prices didn't spike higher in recent days in part because the nation's oil market already had adjusted to the unusually cold winter on the East Coast, said Bob Cowie, operations director at Papco Oil Co. of Virginia Beach, which distributes about 15 million gallons of fuel oil a year.
Oil prices rose 5 cents to 10 cents a gallon during the first cold snap, then dropped a bit and stabilized as the cold winter kept demand high, Cowie said. He expects Papco prices will remain at the current range, from 80 cents to $1.05 a gallon, depending on the type of service.
``The weather's getting better real quick, and that means demand isn't going to be as strong as we've seen it,'' said Will Baird, marketing manager at MG Natural Gas Corp. in Houston.
Traders on Monday bid heating oil for March delivery down by 1.66 cents to 51.60 cents a gallon. The decline helped push crude oil prices lower. March crude fell 26 cents to $17.54 a barrel. March gasoline lost 1.68 cents to 52.06 cents a gallon.
Natural gas for March delivery on Monday sank 30.2 cents - or 12 percent - to $2.165 on the New York Mercantile Exchange for each million British thermal units.
``With a break in the weather, there's a fair degree of certainty that prices could go lower,'' said Warren Tashnek, vice president of Fimat Futures USA Inc. in Houston.
Heating oil and gasoline prices could tumble even more. Talks start today in New York between Iraq and the United Nations on a plan that would allow Iraq to sell $2 billion of crude oil every six months to pay for humanitarian aid.
If Iraq accepts so-called Resolution 986, similar versions of which it has rejected before as a threat to its sovereignty, Iraq would add at least 700,000 barrels of oil a day to the world market. The Organization of Petroleum Exporting Countries, to which Iraq belongs, has indicated it would cut production to make room for the Iraqi barrels, analysts said. But some traders doubt OPEC will make the necessary cuts to prevent a plunge in prices.
``With the Iraqi situation still on the front burner, there doesn't appear to be any shortage of oil on the horizon,'' said Richard Watov, vice president of refined-product trading and supply at American Agip Co. in New York.
Iraqi oil coming onto the market could push prices down $2 a barrel, analysts say. That could translate into a savings of 2.5 cents to 5 cents per gallon of gasoline in the United States.
Meanwhile, lean natural gas inventories in the United States, coupled with scarce spare pipeline capacity, have made natural gas prices gyrate this winter as cold weather boosted demand.
Part of the surge reflects the fact that U.S. gas inventories are 25 percent smaller than last year, according to the American Gas Association. In the eastern half of the United States, where more than two-thirds of the nation's gas consumption takes place, the amount of gas in storage is 30 percent smaller than last year. MEMO: Staff writer Christopher Dinsmore, Bloomberg Business News and the
Associated Press contributed to this report.
by CNB