InfraCap MLP ETF (AMZA)

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As we transition from Fall to Winter, natural gas, diesel and furnace oil inventories are at the lower end of the five year average with diesel sitting some 3.6 million barrels below that benchmark. According to the U.S. Energy Department’s EIA (Energy Information Administration), heating bills this season will rise 17% for furnace oil, while natural gas is expected to record a 12% hike. All of this assuming winter doesn’t get worse than expected, in which case the EIA’s projections may be a tad too conservative. If the diesel inventories are considerably lower than in previous years, the picture for natural gas isn’t much better as storage levels are at their second lowest end-of-season level since 2009.

Adding grist to the mill is the overall robust demand picture for gasoline which, as we saw in Wednesday’s weekly status report by the EIA, contributed to a 4.4 million barrel draw in stockpiles. When to consider that an increase in the use of diesel or distillates due to prolonged cold weather, a rise in the price of oil is almost inevitable, regardless of whether or not OPEC and other producing countries like Russia agree to an extension of crude output curbs. As a consequence, gasoline prices appear to be heading towards sustained higher prices, breaking the downward price trends we see during the late Fall and Winter seasons.