US Heating Oil Futures Rally on Strong Demand Ahead of Colder Winter
US heating oil futures have continued their upward trajectory, driven by expectations of a colder-than-normal winter in the Northeast, the largest heating oil market in the country. The rally comes as crude futures have retreated, with traders profiting from Wednesday's gains ahead of the expiration of the December contract. Meanwhile, the crude market has been highly volatile, with prices fluctuating significantly due to reports of a reduced estimate of growth in world oil demand and rising supplies. The heating oil market, on the other hand, is experiencing a surge in demand, with crack spreads indicating massive buying or short-covering.
Key Takeaways:
- US heating oil futures for December delivery rose 1.86 cents to $1.4300 per gallon.
- The December crude contract fell 62 cents to $46.22 per barrel.
- Heating oil prices have rallied since Wednesday after the government reported a 1 million barrel drop in distillate inventories to 114.6 million last week, leaving stocks 11% lower than a year ago (OD Nov.18,p3).
- Refineries may struggle to produce enough distillates quickly, potentially necessitating imports to fill the shortfall.
- George Orwel, at the New York Mercantile Exchange, notes the structural problems within the US refining system.
Statistics:
- Heating oil futures for December delivery rose 1.86 cents to $1.4300 per gallon.
- The December crude contract fell 62 cents to $46.22 per barrel.
- Crude market prices fluctuated by $1 per barrel.
- Distillate inventories dropped by 1 million barrels to 114.6 million last week.
- Stocks are 11% lower than a year ago (OD Nov.18,p3).
- Crack spreads in the heating oil market indicate massive buying or short-covering.
Sources:
- New York Mercantile Exchange
- International Petroleum Exchange
- OPEC (not explicitly dated, but cited as source of world oil demand growth estimate)
- US Government (not explicitly dated, but cited as source of distillate inventory report)
- Oil Daily (Nov.18, page 3)