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National reserve inventories of heating oil and diesel have just taken their biggest weekly hit since 2004, Bloomberg reported.

The surprise six million barrel distillate draw-down, which sent oil prices even higher last week, was revealed in the Energy Information Administration’s weekly inventory data report. But it comes at a time when Northeast distillate supplies, which include heating oil and diesel, are already well below average. And average residential heating oil prices are now 80 cents a barrel more than they were 12 months ago, with prices forecast to rise even further this winter.

In its Heating Oil Watch report, the EIA says East Coast distillate inventories typically build to a peak in November to help meet winter demand in December, January and February. However they have been declining since the end of August and are now 11 percent below their five-year average. The Northeast is the nation’s biggest heating oil market, with millions of homes reliant on fuel oil for warmth during the harsh winter heating season.

The EIA attributes this year’s lower stocks largely to foreign export demand, with Europe and Latin America leading the charge. The US exported a record 895,000 barrels per day of distillate fuel in August, the most recent month data is available for. Distillate exports from the East Coast have increased 59 percent (33,000 bbl/d) between January and August compared to the same period last year.

While East Coast distillate inventories are tracking lower, Gulf Coast inventories are still quite high, meaning total US stocks are “more comfortable than East Coast data alone would suggest,” the EIA said. But with limited spare pipeline capacity between the Gulf Coast and Northeast, the most likely method to move oil domestically between the regions is by sea, which is slow and expensive, adding more cost to struggling oil users in North Eastern states.

But the EIA said overall, inventories were “adequate” as we head into winter. The US residential heating oil markets was shrinking, meaning less reserve stock was needed to meet forecast heating demand from homes. This was backed up by the International Energy Agency, which said Friday that the US and other industrialized countries were using less heating oil, reducing the impact of cold weather on demand. The number of households in the US Northeast using fuel oil had dropped 20 percent since 2003, the IEA said.

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