Freezing U.S. Weather Draws Rare Heating Oil Cargoes From Europe

Arctic weather in the U.S. East Coast is spurring heating oil shipments from Europe, reversing the typical flow of cargoes.

At least three tankers have been booked to arrive in the U.S. Atlantic Coast in early February, according to shipping fixture data compiled by Bloomberg. Gasoil traded on the ICE Futures Europe exchange in London is today about $32 a metric ton cheaper than diesel, the benchmark for heating oil, for delivery in New York Harbor. The U.S. Northeast is the biggest regional market for the fuel.

“The strength witnessed in the U.S. allowed a rare opening of a reverse arbitrage window as gasoil in northwest Europe was seen trading up to $80 per ton below New York Harbor values,” David Wech, managing director at Vienna-based researcher JBC Energy GmbH, said in a Jan. 28 note.

A second winter storm swept the U.S. Northeast this week, following on from the month of January that included four of the 10 coldest days during the 21st century in the contiguous 48 states. Typically surplus heating oil and diesel is exported from the U.S. to Europe, which is reliant on imports to meet its fuel demand.

“We’ve been lucky that it has been a relatively mild winter in Europe,” Toril Bosoni, refining analyst at the International Energy Agency, said at the Platts Middle Distillates Conference in Antwerp on Jan. 30. “It is normal that when there is a short-term demand requirement that the market reacts to fill it.”

Downside Corrections

The Jag Pranav, a tanker with a capacity of 40,000 tons, was chartered by Royal Dutch Shell Plc to load gasoil for the U.S. Atlantic Coast on Jan. 26, according to data from Poten & Partners. Ross Whittam, a London-based spokesman for Shell, declined to comment by phone.

Orient Sunshine was scheduled or provisionally booked by ST Shipping, Glencore Xstrata Plc’s freight unit, to load a cargo from the Black Sea in early February, according to reports from Poten and Optima Shipbrokers Ltd. Glencore declined to comment, a Baar, Switzerland-based official said, asking not to be identified citing company policy.

The Sti Le Rocher was hired to load gasoil in Rotterdam on Jan. 28 by an unspecified charterer, according to Poten.

“While both heating fuels should be susceptible to further downside corrections as temperatures climb higher, the low inventory levels will keep these markets supported for quite a while as the heating season is far from over,” JBC’s Wech said in the note.

Gasoil stockpiles in independent storage in the Amsterdam-Rotterdam-Antwerp oil-trading hub are at their lowest for this time of year since 2008, according to data from PJK International BV. Distillate fuel inventories in the U.S., which include heating oil and diesel, are at their lowest since at least 2005, according to data from the Department of Energy.

To contact the reporters on this story: Lananh Nguyen in London at lnguyen35@bloomberg.net; Rupert Rowling in London at rrowling@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

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