Heating Oil, Gasoline, Rise to Second Consecutive Yearly Gains

Heating oil and gasoline rose to their second consecutive yearly gains and the highest year-end prices since 2007 after the dollar slipped as confidence in the economic recovery prompted investors to turn to riskier assets.

Product futures each extended their 2010 advances to 20 percent as the dollar sank to a five-week low versus a group of its main global counterparts. A drop in the U.S. currency increases the investment appeal of dollar-denominated commodities.

“I think the weaker dollar is responsible for the energy complex moving up,” said Tom Knight, vice president of trading and supply at Truman Arnold Cos. in Texarkana, Texas.

Heating oil for January delivery rose 5.83 cents, or 2.3 percent, to settle at $2.5437 a gallon on the New York Mercantile Exchange.

The more actively traded February contract gained 4.25 cents to $2.5424. January heating oil and gasoline futures expired at the end of floor trading today.

The Dollar Index, which compares the dollar with a basket of six other major currencies, dropped as low as 78.775, the lowest intraday value since Nov. 23. It was down 0.6 percent at 3:31 p.m. in New York.

Heating oil sank earlier after the Energy Department yesterday reported stockpiles of distillate fuels, including heating oil and diesel, rose 243,000 barrels to 161 million in the week ended Dec. 24, the third gain in four weeks.

Distillate Stockpiles

Analysts surveyed by Bloomberg News projected distillate supplies fell 625,000 barrels. Distillate stockpiles are 17 percent above the five-year average for the period, the same as the prior week.

“We didn’t get the draw that everyone predicted in distillate,” Knight said. “The heat cracks are robust now, which is hard to justify with the amount of inventories we have.

The premium of heating oil over crude, or the crack spread, based on February contracts, widened 24 cents to $15.40 a barrel. A year ago, the spread for the contracts nearest to expiration was $9.50, and averaged $10.80 this year.

Heating oil and the energy complex are basically being led by the global economic picture, said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The perceptions of the global economy and European and U.S. recovery are going to continue to be the primary drivers next year.”

Gasoline Inventories

Stockpiles of gasoline declined 2.32 million barrels to 214.9 million, the first drop in six weeks, the department said yesterday. The survey projected a gain of 1.5 million barrels.

Gasoline for January delivery rose 6.14 cents, or 2.6 percent, to $2.4532 a gallon. The gasoline crack spread, based on February contracts, widened 37 cents to $10.69 a barrel. A year ago, the spread was $6.86, and averaged $9.55 this year.

The more actively traded February contract gained 4.55 cents to $2.4303.

“The question becomes, are we going to keep demand going in 2011,” said Gordon Elliott, a risk management specialist at FC Stone LLC in St. Louis Park, Minnesota. “High energy prices are actually a tax on our economy and we’re going to have a difficult time recovering if that continues.”

Regular gasoline at the pump, averaged nationwide, rose 0.1 cent to $3.072 a gallon yesterday, AAA said on its website. Pump prices increased 16 percent from $2.651 a year ago, according to AAA.

To contact the reporter on this story: Paul Burkhardt in New York at pburkhardt@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.

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