Heating oil surged to a nine-month high as colder weather in Europe boosted gasoil futures, increasing demand for U.S. exports.
Futures gained as front-month gasoil’s premium to the second-month contract, a price structure known as backwardation, increased to the widest in three weeks amid colder weather in Europe that has increased demand for home-heating fuel.
“Because of the cold weather in Europe, the thought is that some of our heating oil would get displaced to Europe,” said Phil Flynn, vice president of research at PFGBest in Chicago.
March-delivery heating oil rose 2.02 cents, or 0.6 percent, to $3.1909 a gallon on the New York Mercantile Exchange, the fourth consecutive gain and highest settlement since May 2.
February gasoil rose $7 to settle at $995.25 a metric ton on the ICE Futures Europe exchange in London. The contract was 75 cents higher than March.
“You’ve probably got a squeeze going on over there with the cold weather,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.
Heating oil has gained 8.7 percent this year amid refinery closures in Europe and the U.S.
U.S supplies of distillate probably fell 875,000 barrels last week, according to the median estimate of 10 analysts in a survey by Bloomberg News.
“Products have been strong because of refinery shutdowns and closures for maintenance,” said Amrita Sen, a London-based analyst at Barclays Capital.
Heating oil’s premium to gasoline rose to 26.34 cents from 24.28, the widest difference since Jan. 17.
“With the latest activity data indicating an economic upturn and, more importantly, colder temperatures in Europe, demand is likely to drive prompt distillate prices higher,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said in an e-mailed report today.
Futures pared gains after touching $3.2208 as Federal Reserve Chairman Ben S. Bernanke said the U.S. still has “a long way to go before the labor market can be said to be operating normally.”
Gasoline for March delivery fell 0.04 cent to settle at $2.9275 on the exchange. Gasoline stockpiles probably rose 875,000 barrels last week, according to the survey.
The Energy Department is scheduled to report last week’s inventories tomorrow in Washington.
Regular gasoline at the pump, averaged nationwide, was unchanged at $3.48 yesterday, according to AAA data. Prices were 11 percent above a year earlier.