Heating Oil Falls on Speculation That Warmth Will Limit Demand

Heating oil fell for the first time in seven days after U.S. inventories rose and forecasters predicted temperatures in the East may climb next week, reducing heating fuel demand.

Futures slid 1 percent as U.S. distillate stockpiles rose 508,000 barrels last week to 132.9 million, the highest level since March 30, according to Energy Information Administration data released yesterday. Temperatures may be near 50 degrees Fahrenheit (10 Celsius) in New York next week, according to MDA Weather Services of Gaithersburg, Maryland.

“We’re seeing temperatures start to moderate and supplies are more than ample,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Heating oil for February delivery declined 2.96 cents to settle at $3.0568 a gallon on the New York Mercantile Exchange. Volume was 1.5 percent above the 100-day average at 3:10 p.m.

Prices rose 0.1 percent this week. The more actively traded March contract fell 2.75 cents to $3.0489. February gasoline and heating oil contracts expire at the close of floor trading Jan. 31.

After a brief respite next week, temperatures probably will remain at least 3 to 5 degrees below normal through much of the Northeast or return to seasonal levels from the current deep freeze until Feb. 8, MDA said.

Gasoil Weakens

Heating oil also fell as gasoil weakened in Europe, indicating less demand for distillate exports from the U.S. at a time when inventories are rising.

“Gasoil in Europe has come down and gasoil has been quite strongly correlated with heating oil,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London.

The February gasoil contract slipped $7.50 to settle at $968.50 a metric ton on the ICE Futures Europe exchange in London.

Diesel shipments to Europe from the U.S. Gulf Coast are poised to decline to a five-week low, a Bloomberg survey showed.

Traders and oil companies booked four tankers to load the fuel during the two weeks ending Feb. 7 and probably will charter four more, according to the median estimate in a survey yesterday of six shipbrokers who specialize in the trade. The total number of vessels is five fewer than last week and would be the smallest since Dec. 21.

Gasoline for February delivery gained 1.25 cents to $2.8754 a gallon on the Nymex, the highest settlement since Oct. 12. Futures rose 2.8 percent this week. Volume was 2.6 percent below the 100-day average. March gasoline gained 1.31 cents to $2.8898 a gallon.

Gasoline Inventories

Gasoline supplies declined 1.74 million barrels to 233.3 million last week, the first drop in nine weeks, according to Energy Information Administration data. Between now and May, an average 1.5 million barrels a day of U.S. refinery capacity will be shut, according to Sen.

“Gasoline is just supported by planned refinery maintenance happening across the U.S. in addition to a number of refinery issues that have impacted inventories,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

The retail price for regular gasoline, averaged nationwide, rose 1 cent to $3.331 a gallon, AAA said today on its website. Prices are the highest since Dec. 9.

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

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.