Earl was a dud, with the brunt of the storm only grazing the New England coast. Be that as it may, the system did take a significant toll on distillate and jet fuel demand as reports came in of numerous regional flight cancellations and train service suspensions up and down the Eastern seaboard.
Therefore, in the short-run chances are that Earl will help soften the blow from the normal seasonal drawdown in ?2 and jet fuel supply that typically begins at the end of this month as refiners ramp-up turnarounds (maintenance season).
As far as distillate fuels are concerned, stocks ended June at 157.9 MMbbls making it the 8th highest June ever recorded (88th percentile) since 1945! As of August 27th the DOE estimates supplies at 175.2 MMbbls. That would be the highest August level since 1981 and the 14th highest since 1945.
In other words, you can’t swing a cat without hitting a barrel of ?2 oil or jet fuel in the US.
Thus, with all of this supply floating around out there, what does this bode for the Nymex heating oil market as we approach the winter? Bear in mind, diesel and jet fuel markets use the Nymex heating oil contract as a proxy hedge. The spot market has been trending higher since May with a series of lows followed by higher lows and highs followed by higher highs. As such, bearish momentum has been stalling in the mid/low 190s in the spot.