Oil prices about to drop some more?

[Peterfield]

Iranian oil is about to hit the market when sanctions are lifted next week and they'll start flooding the market with a 1/2 million barrels a day. So much for oil prices rising when the temps turned colder as was suggested by pundits in late fall encouraging you to "get your pellets now" before prices go up.

http://www.thetimes.co.uk/tto/business/industries/naturalresources/article4665996.ece

 

[Bigjim13]

Guess it's time for Pellet Producers to take that "fuel cost up charge" off their pellet prices.

 

[vinny11950]

Pellet prices haven't dropped that much around my way. And it's always wise to secure your needed supply for the season if you don't have any and not wait for price drops because you may be left out like happened last year to so many people.

Having said that, oil prices are still sliding now that China is not using as much because they have a slowing economy.

 

[Bigjim13]

Pellet prices haven't dropped that much around my way. And it's always wise to secure your needed supply for the season if you don't have any and not to wait for price drops because you may be left out.

Having said that, oil prices are still sliding now that China is not using as much because they have a slowing economy.

Haven't dropped around me at all and I doubt they will. At least until the spring and the shops have a bunch of pellets left over.

 

[alternativeheat]

Maybe UK oil prices will drop enough that they don't need our pellets ! If they don't need our pellets then that wood can be better refined and make domestic pellets for us and severely lower pellet costs here at home. Maybe I said...

But here is the clinker and I don't know how many feel as I do ? But for me when number 2 heating oil is under $1.25 and certainly under $1 then i don't even really look at alternative fuels. I can afford central heat at that point. I'm mixing alternative fuel and central now at $1.50 a gallon.

 

[Bigjim13]

Maybe UK oil prices will drop enough that they don't need our pellets ! If they don't need our pellets then that wood can be better refined and make domestic pellets for us and severely lower pellet costs here at home. Maybe I said...

But here is the clinker and I don't know how many feel as I do ? But for me when number 2 heating oil is under $1.25 and certainly under $1 then i don't even really look at alternative fuels. I can afford central heat at that point. I'm mixing alternative fuel and central now at $1.50 a gallon.

At that price the time and effort of owning a pellet stove is more costly and not worth it. I'm actually looking at putting in a new furnace anyway.

 

[alternativeheat]

At that price the time and effort of owning a pellet stove is more costly and not worth it. I'm actually looking at putting in a new furnace anyway.

Exactly, it was the same with coal for me that we burned for decades on and off according to oil prices. But coal seems priced more stable than pellets, maybe because it's not the Tickle Me Elmo fuel that pellets enjoyed for a short time..

 

[Bigjim13]

Exactly, it was the same with coal for me that we burned for decades on and off according to oil prices. But coal seems priced more stable than pellets, maybe because it's not the Tickle Me Elmo fuel that pellets enjoyed for a short time..

I used to enjoy tinkering with the stove and pellets to get the best performance. Lately though as I've gotten busier it's lost the glow. I don't enjoy the chase every spring or fall for pellets either-calling around, seeing who has what at what price and when their truck is coming.

I guess everything has its price or cost/benefit threshold.

 

[tony_l]

Maybe UK oil prices will drop enough that they don't need our pellets ! If they don't need our pellets then that wood can be better refined and make domestic pellets for us and severely lower pellet costs here at home. Maybe I said...

But here is the clinker and I don't know how many feel as I do ? But for me when number 2 heating oil is under $1.25 and certainly under $1 then i don't even really look at alternative fuels. I can afford central heat at that point. I'm mixing alternative fuel and central now at $1.50 a gallon.

I think you are correct but I would add Europe to the mix. I have read several articles that stated their usage of wood pellets was driving the price. Here is one such article and a google search results in many stating the same http://biomassmagazine.com/articles/12065/regulation-of-europe-bound-us-wood-pellets
I also think the local dealers are stuck with inventory that they paid too much for and are holding out for demand to increase which likely will not happen anytime soon. This really begs the question "what will happen next year?". If local dealers lose their shirts with pellets this year will they make the investment in inventory next year. I have an oil fired boiler but I made the mistake a buying pellets early spring to get the best price. Now with 5 tons of Northern Max (Cubex) and a tight budget I decided to burn what I have and likely switch to oil next season. I almost wish I never bought the stove back in October 2014 but you roll the dice, you take your chances. That said I have no intention of selling it anytime soon.

 

[alternativeheat]

I think you are correct but I would add Europe to the mix. I have read several articlegos that stated their usage of wood pellets was driving the price. Here is one such article and a google search results in many stating the same http://biomassmagazine.com/articles/12065/regulation-of-europe-bound-us-wood-pellets
I also think the local dealers are stuck with inventory that they paid too much for and are holding out for demand to increase which likely will not happen anytime soon. This really begs the question "what will happen next year?". If local dealers lose their shirts with pellets this year will they make the investment in inventory next year. I have an oil fired boiler but I made the mistake a buying pellets early spring to get the best price. Now with 5 tons of Northern Max (Cubex) and a tight budget I decided to burn what I have and likely switch to oil next season. I almost wish I never bought the stove back in October 2014 but you roll the dice, you take your chances. That said I have no intention of selling it anytime soon.

What you are saying is all part of my thought process Tony ! In particular , not just what will happen next year but will happen with this years supply sitting out in the weather. In many locations, it's just a matter of time before it's rendered unusable. I've already bought bags of TSC pellets that show signs of breaking down.My P61 burns it up anyway but many stoves would not. Pellets surround that locations building. If I'm not mistaken they will never unload them ! It's going to be a huge loss if so.

 

[Bigjim13]

What you are saying is all part of my thought process Tony ! In particular , not just what will happen next year but will happen with this years supply sitting out in the weather in many locations it's just a matter of time before it's rendered unusable. I've already bought bags of TSC pellets that show signs of breaking down.My P61 burns it up anyway but many stoves would not. Pellets surround that locations building. If I'm not mistaken they will never unload them ! It's going to be a huge loss if so.

Same thinking here and TSC has LOTS of pellets as I'm sure HD does too.

 

[alternativeheat]

Same thinking here and TSC has LOTS of pellets as I'm sure HD does too.

And Lowes from what I'm hearing. At least HD here seems to be moving some but they also have the least desirable brands. This could all turn into quite the conundrum down the road a bit.

 

[Bigjim13]

And Lowes from what I'm hearing. At least HD here seems to be moving some but they also have the least desirable brands. This could all turn into quite the conundrum down the road a bit.

Like you I am very curious to see what happens with pellet supply and prices in the future.


Should be interesting to see.

 

[alternativeheat]

Like you I am very curious to see what happens with pellet supply and prices in the future.


Should be interesting to see.

Sometimes I think I should have just stuck with a Plain Jane hand fired coal stove. The chimney needed a new liner either way LOL, but now I have a 4" liner and most hand fired coal stoves require 6". I don't know of a coal stove other than stokers that take 4". So I'm a bit stuck with pellets if to burn alternative fuel. I think a stoker would be too costly.

 

[billb3]

A half a million bbls a day next week is highly doubtful.
Two years ago estimates were for a potential of a half a million, maybe a million bbls within a year of nuclear sanctions being lifted. That was when oil was $100+ a bbl. At $25 a bbl it's going to take them a lot longer to get capacity increased from what they've been producing despite sanctions. It's not like they've been pumping nothing and it's not like there is no black market they have not been selling into.
I bet they won't even be pumping an extra 400,000 a year from now. China might invest in some capacity for their own use. So I reserve the right to discount any foreign aid from China.
Getting in a race with Saudi Arabia to see who can get to $10 a barrel first doesn't make a lot of sense no matter how much you need the money.

 

[stallau]

One other potential customer for the extra Oil could be Europe and then they can turn the screws to the Russians even more.

I'm enjoying the cheap oil I have about 6 tons I bought for the winter but figure I'll save it for when oil goes back up and then I just won't have to buy any fuel that winter.

 

[Peterfield]

A half a million bbls a day next week is highly doubtful.
Two years ago estimates were for a potential of a half a million, maybe a million bbls within a year of nuclear sanctions being lifted. That was when oil was $100+ a bbl. At $25 a bbl it's going to take them a lot longer to get capacity increased from what they've been producing despite sanctions. It's not like they've been pumping nothing and it's not like there is no black market they have not been selling into.
I bet they won't even be pumping an extra 400,000 a year from now. China might invest in some capacity for their own use. So I reserve the right to discount any foreign aid from China.
Getting in a race with Saudi Arabia to see who can get to $10 a barrel first doesn't make a lot of sense no matter how much you need the money.

Actually, not doubtful to oil executives I've been in touch with over the past six months, who pretty much were dead on accurate in predicting what would happen over the past six months. Even ISIS is selling oil on the black market to raise cash so the Iranians are expected to get whatever they can into the open market and have made no secret of that goal. What it means for us pellet burners is vendors can't use the oil market to justify what many brands are charging these days. Throw in a moderate winter and the gods are with the pellet buyers this season. I haven't had to pay over $200/ton yet through mostly private sales as many burners are selling of their stashes in New England and burning nice cheap oil instead.

 

[williaty]

I've been following some interesting commentary that's suggesting sometime this year we'll see oil <$10bbl. The reasoning they give is that supply is currently exceeding demand, so everyone who can store oil is storing oil. It seems there's some reason why dropping a well's production below a certain output is difficult or impossible without just shutting it off (though I didn't see a technical explanation of why this was so). The crude storage is largely filled, so people started refining it and storing refined products. That storage is nearly full as well. At some point in 2016, someone's storage is going to be 100% full and they're going to have to start putting oil on the market at the same rate they're taking it out of the ground, which is going to further depress the price. If Iran really does put that much additional oil into the market, it's only going to hasten the storage fill up and the price drop.

 

[LocustPocust]

It could go below $10 a barrel, with one article I read speculating that it could actually go to $1.

In my little town I've seen the oil truck making it's rounds more this winter than I have in a very long time, and I know Firewood sales are suffering.

Many are tired of the work involved with alternatives and have gone back to burning Oil. Pellet prices haven't come down much and I think the industry is in trouble.

 

[jackhammer]

You can all thank me for the low oil prices. I spent four grand on a new stove!

 

[Brian26]

Maybe UK oil prices will drop enough that they don't need our pellets ! If they don't need our pellets then that wood can be better refined and make domestic pellets for us and severely lower pellet costs here at home. Maybe I said...

But here is the clinker and I don't know how many feel as I do ? But for me when number 2 heating oil is under $1.25 and certainly under $1 then i don't even really look at alternative fuels. I can afford central heat at that point. I'm mixing alternative fuel and central now at $1.50 a gallon.

I'm not a pellet burner but at these prices its hard not to just turn up the t-stat.

 

[alternativeheat]

It could go below $10 a barrel, with one article I read speculating that it could actually go to $1.

In my little town I've seen the oil truck making it's rounds more this winter than I have in a very long time, and I know Firewood sales are suffering.

Many are tired of the work involved with alternatives and have gone back to burning Oil. Pellet prices haven't come down much and I think the industry is in trouble.

Well there comes a point where oil is cheap enough it doesn't matter. That's when I shut my stove off till the next round. My coal stove spent 10 years on the hearth basically un-used and guess what happened ? Oil started climbing ( again) and when filling your oil tank costs more than your mortgage payment, You start thinking "I'll Light The Stove", or " there has to be another way to heat this house". Heating by stove is purely alternative heat to me, when it's an "alternative" it should cost less to fuel than the oil burner , not more.. Right now, here today, oil is slightly below the breaking point. And so pellet stocks will sit in the yards with low and now still dropping oil pricing around. I've said all along throughout my life that there is absolutely no reason that oil needs to be more than a buck a gallon. And that's being generous, the stuff costs about a nickle to get out of the ground and process. We pay inflated prices over pure greed and nothing else. When we moved into this house oil was $.39 a gallon and we budgeted for that then and have fought to pay oil bills ever since, the cost of which has never been back there since. Today we have more sources of oil than ever on earth, not less. Oil should be cheap, it's all about how it gets controlled and the consumer suffers. Well, so we get a reprieve for how ever long it lasts, for until Greedy Men figure out the next method to fleece everyone...

The pellet industry was headed down the same road, "lets get all we can for a bag of pellets" mentality. . And they got stuck.

 

[claydogg84]

And Lowes from what I'm hearing. At least HD here seems to be moving some but they also have the least desirable brands. This could all turn into quite the conundrum down the road a bit.

A close friend works for a dumpster roll off company. A local Home Depot called and asked for 2 of their largest enclosed containers. When he went to pick them up, both were full of unopened pellets, on their 1 ton pallets. This was a week or so before Christmas.

 

[Bigjim13]

Well there comes a point where oil is cheap enough it doesn't matter. That's when I shut my stove off till the next round. My coal stove spent 10 years on the hearth basically un-used and guess what happened ? Oil started climbing ( again) and when filling your oil tank costs more than your mortgage payment, You start thinking "I'll Light The Stove", or " there has to be another way to heat this house". Heating by stove is purely alternative heat to me, when it's an "alternative" it should cost less to fuel than the oil burner , not more.. Right now, here today, oil is slightly below the breaking point. And so pellet stocks will sit in the yards with low and now still dropping oil pricing around. I've said all along throughout my life that there is absolutely no reason that oil needs to be more than a buck a gallon. And that's being generous, the stuff costs about a nickle to get out of the ground and process. We pay inflated prices over pure greed and nothing else. When we moved into this house oil was $.39 a gallon and we budgeted for that then and have fought to pay oil bills ever since, the cost of which has never been back there since. Today we have more sources of oil than ever on earth, not less. Oil should be cheap, it's all about how it gets controlled and the consumer suffers. Well, so we get a reprieve for how ever long it lasts, for until Greedy Men figure out the next method to fleece everyone...

The pellet industry was headed down the same road, "lets get all we can for a bag of pellets" mentality. . And they got stuck.

This is spot on for me too, except I don't have a coal stove. In my area it's almost a requirement to have an oil fired or propane fired furnace as your primary heat. My wife and I will be looking to upgrade our oil fired furnace as we plan on selling our house in the next 1 to 3 years. And it's really old. We wouldn't be able to sell our house with a pellet stove as primary heat.

And honestly, who thinks oil is going to really stay this low? It may take six months, one year, or five years but oil will go back up. And at that point I may or may not have a pellet stove.

 

[vinny11950]

You can all thank me for the low oil prices. I spent four grand on a new stove!

This is the interesting relationship between alternative fuels and carbon fuels. You can't be all in on one side because you then don't have any choice and no purchasing power. With alternative fuel, you can hedge your fuels and spread your risks. I see a lot of people getting rid of their pellet stove in the coming months only to regret it later on. Oil prices will rebound because producers can't keep extracting at these lows prices. They will go out of business. Once they are out prices will rebound. How long will this take? Don't know. But investment money for all these oil projects must be drying up.