Heating Oil Reaches Three-Month High on Supply Drop, Jobs

Heating oil rose to a three-month high as U.S. distillate inventories fell to 19 percent below a year earlier and a drop in jobless claims indicated the labor market may be stabilizing.

Futures gained as distillate supplies, including heating oil and diesel, fell 724,000 barrels to 123.5 million last week, according to Energy Department data. U.S. applications for unemployment benefits fell 6,000 to 361,000 in the week ended Aug. 3, Labor Department figures showed. Heating oil outperformed crude oil and gasoline on the Nymex.

“This is on the back of the inventories,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The supply situation is not good for distillates.”

Heating oil for September delivery rose 1.59 cents, or 0.5 percent, to $3.0318 a gallon at 12:23 p.m. on the New York Mercantile Exchange. Prices touched $3.036, the highest intraday level since May 4.

The biggest inventory decline last week, 1.4 million barrels, was in PADD 3, home to Gulf Coast refineries that export diesel to South America and Europe.

Wholesale demand for heating oil and diesel increased 1.2 percent to 3.79 million barrels a day, the highest level in five weeks. Heating oil futures are traded as a substitute for diesel.

The crack spread, or premium of heating oil over crude, based on September contracts, widened 33 cents to $33.65 a barrel and touched $33.72, the largest gap since February.

Economist Forecasts

The median forecast of 43 economists surveyed by Bloomberg News called for jobless claims to increase to 370,000 in initial jobless claims. The department revised the previous week’s figure up to 367,000 from an initially reported 365,000.

“First-time jobless claims is a positive for the economy,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Gasoline fluctuated as concern persisted that Europe’s economy will weaken further, hurting fuel demand. The euro- area’s economy will shrink 0.3 percent this year, larger than a 0.2 percent contraction predicted earlier, according to a European Central Bank survey of professional forecasters.

“The jobs report was encouraging but the big question in the market is whether the Federal Reserve, as well as the European Central Bank and China, are going to implement measures to encourage growth,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

China’s industrial-output growth unexpectedly slowed in July to a three-year low while investment and retail sales missed estimates, increasing pressure on Premier Wen Jiabao to step up efforts to support expansion.

Gasoline for September delivery rose 0.06 cent to $2.981 a gallon on the Nymex, after fluctuating between $2.9634 and $2.995.

Regular gasoline at the pump, averaged nationwide, gained 1.5 cents to $3.662 a gallon yesterday, AAA data showed. That’s the highest price since May 24. Prices are higher than a year earlier for the first time since April, according data from the nation’s largest motoring organization.

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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