It’s no secret that this winter has been much warmer than the last – but how much warmer and how is that impacting the industry?
As of today, there have been 3183 heating degree days (HDD) in the PIttsburgh Area compared to 4449 last year. HDD is a measurement derived from outside air temperature that is reflective of the energy required to heat a building. The difference between this year and last, 1266 HDD, helps explain the unusual trends that we are seeing this winter - stronger gasoline demand and an increase in distillate inventories. Gasoline demand is generally higher during warmer months when many people are travelling and lower during winter months when many of us “hibernate.” As mentioned in yesterday’s blog, gasoline is at its highest seasonal demand on record, which is likely due to these unseasonably warm temperatures. On the contrary, diesel fuel demand is higher during colder periods as it is used to heat buildings and run equipment. On trend with this year’s temperatures, we are seeing an overall build in diesel inventories.
If you are interested in the math behind HDD, continue on. If not, you should probably skip to the last paragraph. To arrive at the HDD number, various methods can be used so it is important to know the method of calculation. The method used at Guttman, and for this article is:
The 65 degree is representative of the base temperature which is adequate for indoor human comfort. Each day the HDD is calculated and added to the previous balance to get a running total for the year (HDD year begins September 1).
This morning WTI and ULSD are trading up $0.84 at $33.91 and $0.0320 at $1.1020, respectively, while gasoline was down $-0.0027 at 1.0533. Yesterday WTI closed up $0.92 at $33.07, gasoline finished up $0.0456 at $1.0560, and ULSD closed up $0.0106 at $1.0700.