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Heating Oil Gains on Refinery Shutdowns, Brent Crude Strength

Heating oil futures gained amid speculation that refinery upsets and planned unit shutdowns will reduce inventories.

Futures rose as PBF Energy Inc. has reported a series of flaring and malfunctions this month at its Delaware refinery. Exxon shut a unit at its Beaumont, Texas, plant for unplanned work and BP Plc’s Whiting, Indiana, refinery will shut a crude unit next month for as long as two months of maintenance. Distillate inventories are 17 percent below a year earlier, according to Energy Department data.

“A few refinery glitches are lending support and with Whiting, you might see tightness in product markets going forward,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Heating oil for August delivery climbed 4.23 cents, or 1.6 percent, to settle at $2.7618 a gallon on the New York Mercantile Exchange.

Heating oil and gasoline widened gains as the premium for Brent crude over U.S. benchmark West Texas Intermediate oil may increase the cost of European fuel imports.

“Heating oil seems to be leading the market,” McGillian said. “It’s following Brent. Gasoline is not as strong because there’s only six more weeks of driving season.”

Brent’s premium to WTI for August delivery widened to $14.42 from $14.06 yesterday, the largest gap since June 13.

The Energy Department reported that distillate inventories rose 3.1 million barrels last week to 120.9 million, the biggest gain since January.

Distillate Demand

Distillate demand slid 16 percent to an average 3.24 million barrels a day, the lowest level since the week ended March 16 when inventories also sank 16 percent. The decline may reflect delays in exporting diesel because of Tropical Storm Debby, which moved through the Gulf of Mexico last month.

“This could have been the aftermath of Tropical Storm Debby impacting some shipping,” said David Pursell, a managing director at Tudor Pickering Holt & Co. LLC in Houston.

Gasoline use fell 0.9 percent to 8.92 million barrels a day, department data show. Demand over the past four weeks was 3.9 percent below a year earlier. Total fuel consumption slid 5.4 percent to 18.5 million barrels a day, a five-week low.

U.S. gasoline supplies rose 2.75 million barrels to 207.7 million even as refiners reduced output of the motor fuel 0.8 percent to 9.32 million barrels a day. Supplies have climbed five of the past six weeks, increasing 3.8 percent to the highest level since April 27.

Summer Demand

“We only have a couple of weeks in July and August for summer demand to improve,” said Sander Cohan, a global transportation fuels analyst and principal with Energy Security Analysis Inc. in Wakefield, Massachusetts. “We have plenty of product.”

East Coast stockpiles of gasoline rose 2.1 percent from a seven-week low to 53.4 million barrels. Supplies are 4.2 percent lower than a year earlier. The region’s supplies of reformulated gasoline, or RBOB, fell 5.3 percent to 14.6 million barrels, 8.8 percent below a year earlier.

“RBOB continues to be tight in the Northeast, and that is supportive of prices,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

August-delivery gasoline gained 2.2 cents, or 0.8 percent, to settle at $2.7689 a gallon on the exchange. The August contract’s premium over September narrowed for the first time since June 27, dropping 0.56 cent to 12.67.

Regular gasoline at the pump, averaged nationwide, rose 0.2 percent yesterday to $3.383 a gallon, according to AAA. Gasoline reached a year-to-date high of $3.936 on April 4.

To contact the reporter on this story: Barbara J Powell in Dallas at bpowell4@bloomberg.net

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

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