Oil use in power sector climbs in New England

OREANDA-NEWS. Fuel oil use in New England power generation jumped in the past week as natural gas prices in that region rose to a strong premium to oil amid unusually cold weather that boosted heating demand and electricity load.

Oil units in the region accounted for 24pc of electricity output on 16 February, matching the share for natural gas, data from the regional grid operator show.

Load on 16 February peaked at 20,095MW, exceeding the February 2014 peak by 2.3pc. Temperatures in Boston that day fell to -3°F (-20°C), the lowest so far in winter 2014-15. Cold weather and winter storms are still hitting the region.

Oil burn remained high yesterday and today, exceeding 3GW on average. Oil burn data from the grid operator cover dual-fuel units as well.

Daily natural gas prices at Algonquin Citygates averaged \\$20/mmBtu in the past week, a 30pc premium to diesel 500ppm NYH barge assessments. New England's grid operator uses that oil product index as a price benchmark for the region's dual-fueled units. Regional natural gas last were at a premium to oil in late January.

Oil units rarely are used in New England because of environmental restrictions. But the grid operator for the past two winters relied on oil to back up gas-fired generators, citing fuel supply risks on the region's constrained pipeline system where natural gas at times is scarce at any price.

The higher run for oil units in recent days reflects fuel economics rather than forced outages for gas-fired units, the Independent System Operator of New England said. The grid operator has subsidized stockpiling oil for dual-fuel units ahead of winter, by promising to pay \\$18/bl for any unused inventory at the end of the winter. More than 4mn bl has been stockpiled.

LNG import terminals supplying the northeast US also had higher-than-normal sendout rates in the past week.