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As temperatures drop and demand for heating fuels rises, winter 2025-2026 presents a uniquely challenging supply environment for wholesale fuel buyers. According to the U.S. Energy Information Administration, distillate inventories are forecast to end 2025 at their lowest levels since 2000, while East Coast inventories will enter the heating season at second-lowest levels since 1981. This tightness, combined with reduced refining capacity and ongoing infrastructure constraints, demands proactive preparation from fuel resellers, dealers, distributors, and high-volume commercial users.
The Wholesale team at Shipley Energy believes preparation and foresight are critical-not only for meeting customer demand but also for protecting margins and building resilience in volatile markets. Below, we share our perspective on the key factors shaping this winter’s supply environment and what wholesale fuel buyers need to keep in mind.
Contact the Wholesale Team About Winter 2025
Winter 2025’s fuel supply environment is defined by historically low distillate inventories, reduced refining capacity, and strong export demand creating unprecedented tightness in wholesale markets
U.S. total distillate inventories decreased by 17% (approximately 22 million barrels) during the first half of 2025, significantly more than the average 10% decrease (14 million barrels) over the same period in the previous four years. For fuel buyers in the Northeast, the situation is particularly acute. East Coast distillate inventories are projected to start the November heating season at 26.3 million barrels-the second-lowest end-of-October level in data dating back to 1981.
The structural challenges extend beyond inventory levels. Multiple refinery closures have reduced available production capacity across the country. The LyondellBasell Houston refinery shut down in early 2025, and two California refineries with a combined 284,000 barrels per day in refining capacity plan to close over the next two years. These closures permanently reduce the domestic supply cushion that wholesale buyers have historically relied upon during peak demand periods.
Strong international demand compounds the domestic supply tightness. U.S. distillate exports averaged 1.2 million barrels per day in the first half of 2025, 7% more than the previous five-year average-as European markets continue to replace Russian fuel products with U.S. supplies. This export demand keeps domestic inventories under pressure even when production increases.
For fuel resellers and high-volume commercial users, these supply dynamics translate into practical operational challenges: tighter terminal availability, increased competition for rack space, and greater risk of supply disruptions during peak demand events.
Weather forecasts suggest winter temperatures and residential energy consumption will broadly be similar to last winter for much of the United States. However, the critical factor for wholesale fuel buyers is not average temperatures but the impact of cold snaps on already-constrained supply chains.
The EIA forecasts U.S. demand for home heating oil to average 390,000 barrels per day this winter. Even small temperature shifts below seasonal norms can move millions of gallons of demand into compressed timeframes, straining logistics networks and terminal infrastructure. The dealers and resellers who maintain adequate supply buffers and diversified sourcing will be best positioned to capture additional demand during weather events without facing supply gaps.
For wholesale buyers serving Northeast markets, the combination of low starting inventories and normal winter demand creates volatility risk. Any extended cold period could rapidly draw down the limited inventory cushion, triggering price spikes and supply competition among regional buyers.
What it means for you: monitor weather forecasts 7-14 days out, maintain relationships with a diversified supplier like Shipley Energy, and ensure your storage capacity can handle demand surges without emergency reordering at premium prices.
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Three primary factors drove distillate inventories to multi-year lows: reduced renewable diesel production creating increased demand for petroleum-based distillate, strong international export demand, and domestic refinery closures limiting production capacity.
As renewable diesel and biodiesel consumption decreased by 124,000 barrels per day (35%) in the first half of 2025 compared with the same period in 2024, petroleum distillate fuel oil consumption increased by approximately 170,000 barrels per day, or 5%. This shift meant that more petroleum-based distillate was consumed domestically, preventing normal seasonal inventory rebuilding. For wholesale buyers, this demand surge competed directly with the need to restock inventories ahead of winter.
U.S. distillate exports remained elevated throughout 2025, averaging 7% above the five-year average as European and other international buyers continued sourcing American fuel products. These exports effectively reduced the volume available for domestic inventory accumulation, keeping markets tight even during periods of strong refinery runs.
Recent and planned refinery closures have permanently reduced the industry’s ability to quickly ramp production in response to inventory drawdowns. The loss of refining capacity means less flexibility to respond to unexpected demand or supply disruptions, making proactive inventory management and risk mitigation more critical for wholesale buyers.
Lower crude oil prices will drive heating oil and diesel prices below 2024 levels, with winter 2025-2026 heating oil forecast to average $3.50 per gallon – a 9% decline from last year. However, tight Northeast inventories create volatility risk that could offset price benefits during cold snaps.
The EIA forecasts that Brent crude oil prices will fall to an average of $62 per barrel in the fourth quarter of 2025 and $52 per barrel in 2026, driven by rising global oil inventories putting downward pressure on prices. This decline in crude costs is the primary driver behind lower heating oil and propane prices entering the winter season. Retail propane prices are forecast to be 12% less than last year, while heating oil prices show similar decreases.
Current wholesale heating oil prices reflect this trend. As of October 17, 2025, heating oil traded at $2.14 per gallon, down 8.66% over the previous month and 0.72% compared to the same time last year. Regional pricing shows significant variation: East Coast heating oil prices dropped from $3.80 per gallon in March 2025 to $3.45 per gallon by May 2025, with New England seeing declines from $3.79 to $3.39 per gallon.
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However, prices may remain volatile. Wholesale fuel prices remain influenced by geopolitical events, OPEC+ production decisions, and shifts in demand from both U.S. and international markets. Diesel crack spreads continue rising as refiners face tight supply conditions despite lower crude oil costs. For wholesale buyers, this environment means prices can swing rapidly in response to weather events, geopolitical developments, or supply disruptions.
What customers can expect: lower average prices compared to last winter, but volatility does not have to translate into uncertainty. With the right strategy, price swings can be managed-and in some cases, even used to your advantage.
In markets characterized by tight supply and elevated volatility, strategic risk management tools provide wholesale fuel buyers with cost stability and supply security. Recent years have demonstrated the financial impact of unmanaged volatility: in 2023, intraday wholesale price movements of 10 cents or greater occurred 20 times between January and November – compared to just 12 times total in the previous 10 years.
Fixed forward contracts allow wholesale buyers to lock in future fuel prices today, providing budget certainty and protection against price spikes during peak demand periods. In certain market conditions such as backwardation-where near-term prices are higher than future prices-fixed forward contracts offer strategic advantages by allowing businesses to secure tomorrow’s lower prices immediately.
These contracts come in two primary forms: short-term contracts covering a few months to a year, ideal for immediate price stability and flexibility, and long-term contracts spanning several years for extended price security. Wholesale buyers can also structure partial volume hedges, fixing perhaps 50% of anticipated fuel needs while maintaining exposure to potential price decreases on the remaining volume. This balanced approach limits market volatility exposure while preserving upside opportunity.
Fuel resellers face a unique risk profile: they have a natural hedge to gradual price fluctuations through their buy-mark-up-resell model, but the risk lies in the holding period and market volatility. NYMEX heating oil futures or swaps can offset physical market losses with gains in a commodities account. By implementing proper fuel hedging, losses incurred in your physical fuel position due to unfavorable market movements are compensated by funds that flow into your commodities account.
For resellers, shortening the holding period through better inventory management reduces exposure. If you only sell 10,000 gallons per week, holding 50,000 gallons in storage creates unnecessary risk. Additionally, protecting your basis is critical-as recent years have demonstrated, local rack and pipeline price basis can be exponentially more volatile than NYMEX futures. Hedging NYMEX alone still leaves you exposed to regional basis volatility.
Not all wholesale buyers can or should lock in fixed prices. For fuel end users who cannot pass fuel surcharges to their customers, fixed pricing or CAP programs provide budget certainty and eliminate guesswork. However, businesses with pass-through capabilities may benefit from floating-index structures that maintain exposure to crude price declines while protecting against regional supply disruptions through basis hedges.
This approach allows wholesale buyers to capture the benefits of the forecast decline in crude oil prices through 2026 while protecting against the Northeast’s inventory-driven volatility risk.
Supply chain resilience is as critical as price management. Refinery shutdowns, pipeline failures, transportation strikes, cyber-attacks, or weather events can halt fuel delivery. Even short periods of pipeline delays or temporary gaps in transportation can disrupt fuel availability, impacting your ability to meet customer demand and damaging profitability.
Shipley Energy maintains positive, longstanding relationships with nearly every fuel supplier and reputable transportation company in our market area. By extension, our customers benefit from this diverse network. We maintain strategic terminal and bulk plant storage positions throughout our market area to buffer short-term supply disruptions, and our in-house transportation team works directly with our supply team to ensure smooth customer experience during market disruptions.
For wholesale buyers building their own resilience: establish relationships with multiple suppliers, negotiate pre-arranged backup terminal access, develop partnerships with logistics companies that have redundancy built into their business models, and maintain adequate storage-if you cannot store 10 days of demand (one pipeline cycle), ensure your supplier has terminal storage capacity available.
Reach Out to Manage Your Fuel Risk
Beyond pricing and risk management, winter places operational demands on every dealer and distributor. We encourage wholesale buyers to focus on these critical areas:
By tightening operations now, dealers can avoid costly disruptions during peak periods when supply competition intensifies and logistics become constrained.
The window for proactive winter preparation is narrowing. Wholesale fuel buyers should take these immediate actions before peak heating season demand arrives:
Calculate your exposure to price volatility by reviewing historical purchasing patterns and margin compression during past price spikes. Identify budget constraints and determine how much price certainty versus market flexibility your business requires. Consider both your operational risk tolerance and your customers’ expectations for stable pricing.
Consult with risk management advisors – like the Shipley Energy Wholesale team – to review the forward curve and available contract structures. With crude oil prices forecast to decline through 2026, evaluate whether partial fixed pricing protects downside risk while maintaining upside opportunity. Review option premiums and structure programs matching your volume requirements and timeline.
Confirm delivery schedules with current suppliers and establish backup supply sources before winter demand creates competition for allocation. Negotiate terms for emergency situations now rather than during supply constraints when premium pricing becomes unavoidable. Ensure your suppliers have terminal storage and transportation redundancy.
Build adequate working capital reserves to handle potential price swings or temporary supply tightness requiring premium purchases. Develop response protocols for supply disruptions, including customer communication plans and allocation prioritization. Establish clear communication channels with suppliers for real-time market intelligence during volatile periods.
Strengthen Your Supplier Relationships
Winter 2025-2026’s supply environment-characterized by historically low inventories, reduced refining capacity, and ongoing infrastructure constraints-makes proactive risk management essential for protecting margins and ensuring reliable supply. While lower crude oil prices will drive heating oil and diesel costs below 2024 levels, the tight Northeast inventory position creates volatility risk that wholesale buyers must actively manage.
Multiple tools are available to balance stability and flexibility: fixed forward contracts for budget certainty, inventory hedging for resellers managing holding period risk, floating-index structures with basis protection for those who can capture crude price declines, and diversified supply relationships for operational resilience.
At Shipley Energy, our commitment extends beyond fuel supply. We actively monitor conditions at terminals, pipelines, and transportation hubs across the markets we serve. Our goal is to anticipate potential chokepoints and keep our customers supplied and informed even when the unexpected occurs. We work with each customer to design tailored risk management programs matching their unique needs, providing confidence in unpredictable markets.
Redundancies are built into every aspect of our business-from supply origins to storage and transportation services. These systems are maintained to ensure our customers receive reliable service in any market scenario. We believe those who prepare today will be positioned to thrive tomorrow.
Ready to discuss your winter fuel strategy? Reach out to the Shipley Energy Wholesale team today at 717-771-0772 or through our contact page.
Disclaimer: The market outlook is intended solely for informational purposes only. Shipley Energy Company does not warrant or attest to its accuracy. All actions and judgments taken in response to this report are the recipient’s sole responsibility. Shipley Energy Company shall not be liable for any direct, indirect, incidental, consequential, special, or exemplary damages or lost profit resulting from these market updates. This content was prepared 10/30/2025.
