US Heating Oil Reserve Release: 315,000 Barrels Against the Lowest East Coast Stocks Since 1990

How big the heating oil reserve release is

The Northeast Home Heating Oil Reserve holds about 1mn barrels, with sites in Maine, Massachusetts, Connecticut and New Jersey, Reuters reported. So the loan is nearly a third of it. In addition, the US has tapped the reserve only once since Hurricane Sandy in 2012.

Against national demand, though, the volume is tiny. The US used 3.73 mmbbl/d of distillate in the week to 16 October, according to EIA. On our calculation, 315,000 barrels equal about two hours of that demand. They also equal about 1.5% of East Coast distillate stocks. Similarly, they match roughly 1.2 days of East Coast refinery output of distillate.

Senator Susan Collins said the release equals a 13% supply increase for New England. We could not check that figure against public data, and she gave no period. By contrast, Tom Kloza of Gulf Oil called the move “puzzling and probably inconsequential”, Reuters reported.

The real squeeze: East Coast stocks

The bigger story is the stock level. East Coast distillate stocks stood at 21.0mn barrels on 16 October, EIA data show. That is the lowest mid-October level in EIA’s weekly series, which starts in 1990. It is also about 30% below the 2021-2025 average for the same week, on our calculation.

Nationally, the picture is tight but less extreme. US distillate stocks were 104.3mn barrels, about 9% below the 2021-2025 average for the week. That equals about 28 days of current demand.

Why diesel and heating oil cost so much

Crude is part of the story. Brent averaged $125.59 a barrel in the week to 16 October, EIA data show. That is about double the level of a year earlier. Even so, product prices have risen faster. New York Harbor ultra-low sulphur diesel averaged $5.03 a gallon that week, or about $211 a barrel.

On our calculation, that implies a diesel crack of about $85 a barrel over Brent. A year earlier, the same measure was about $31. In other words, the shortage is in refined products, not just crude. Retail diesel averaged $6.28 a gallon nationally on 19 October, up 73% on a year earlier. It peaked at $6.53 in September, according to EIA.

The heating oil reserve and the wider US toolbox

The heating oil reserve is one of several levers. Washington has already agreed to lend 172mn barrels of crude from the Strategic Petroleum Reserve (SPR), Reuters reported. As a result, the SPR held 282.7mn barrels on 16 October, down from 408.6mn a year earlier, EIA data show. The administration also wants refiners to run harder.

Politics matters too. About a third of New England homes use heating oil, including about half in Maine, Reuters noted. Midterm elections take place on 3 November. Meanwhile, Energy Secretary Chris Wright called the loan “a temporary measure”. He urged north-eastern states to back the Constitution gas pipeline instead, which New York has blocked on environmental grounds.

For a comparison with India’s own buffer, see our analysis of India’s strategic petroleum reserves.

What to watch next

• Bids on 27 October, and how much of the 315,000 barrels companies take.
• Weekly East Coast stocks, with the next EIA data due on 28 October.
• Further releases: the department will judge whether more are needed, a source told Reuters.
• The diesel crack, the clearest sign of whether the product squeeze is easing.
• Winter weather in the North-East, which drives heating oil demand.

In short, the heating oil reserve release is a political signal more than a supply fix. The real test is whether refiners and imports can rebuild East Coast stocks before the cold arrives. For the announcement itself, see our news report on the reserve exchange.