Heating Oil Declines to Four-Month Low on Europe Debt Concerns

Heating oil slid to the lowest level this year on speculation that diesel use will slow as the outcomes of elections in France and Greece raised concern that euro-nation countries won’t agree how to address the region’s debt crisis.

Futures sank as Francois Hollande was elected president of France, pledging to push for less austerity and more growth. In Greece, voters flocked to anti-bailout parties. Prices also fell after Labor Department figures on May 4 showed the U.S. added fewer jobs than expected during April.

“There’s concern that diesel demand will struggle due to the weakness and uncertainty in Europe,” said Phil Flynn, vice president of research at PFGBest in Chicago.

June-delivery heating oil dropped 2.74 cents, or 0.9 percent, to $2.9814 a gallon on the New York Mercantile Exchange. It was the fifth straight loss and lowest settlement since Dec. 30.

U.S. deliveries of transportation and heating fuel to wholesalers, in the four weeks ended April 27, fell 1.6 percent below a year earlier, according to the Energy Department weekly inventory report on May 2. Total fuel use was 1.7 percent less than in 2011.

“The Greeks and the French stirred up fears there won’t a cohesive policy coming out of Europe,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The jobs report prompted some selling and added to fears we are going to have a slowing global economy.”

U.S. Payrolls

Payrolls in the U.S. climbed 115,000, the smallest gain in six months, after a revised 154,000 rise in March that was more than initially estimated, department figures showed. The median estimate of 85 economists surveyed by Bloomberg News called for a 160,000 advance.

Hollande defeated Nicolas Sarkozy, who became the first French president in more than 30 years to fail to win re-election. Hollande advocates a more aggressive European Central Bank role in spurring growth -- a measure opposed by Germany.

Citigroup Inc. said today that the risk of Greece leaving the euro within the next 12 to 18 months is as high as 75 percent.

“The impetus today are the elections,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “There’s concern about Europe. What happens if there is a dramatic risk-off trade? The market could be vulnerable.”

Heating Oil Premium

Heating oil’s premium to gasoline has been narrowing since reaching 8 cents on May 1. The gap slipped to 1.04 cents today from 3.3 cents May 4.

Gasoline strengthened relative to heating oil “partly in expectation that demand will pick up near the Memorial Day holiday and that diesel demand will struggle due to the weakness and uncertainty in Europe,” Flynn said.

Gasoline for June delivery fell 0.17 cent to settle at $2.9741 on the exchange, the lowest settlement in three months.

U.S. gasoline consumption over the four weeks ended April 27 was 4.7 percent below a year earlier, according to an Energy Department report released May 2. Exports averaged 412,000 barrels a day, down from 616,000 barrels a day in early March.

“U.S. demand has been lackluster to say the least,” Lebow said. “A lot of the support for gasoline has come from export demand.”

Gasoline has dropped 13 percent since reaching a 2012 high of $3.4166 on March 26, paring its year-to-date gain to 11 percent from 27 percent.

Regular gasoline at the pump, averaged nationwide, fell 0.6 cent to $3.777 a gallon yesterday, the lowest level since March 8, according to AAA. Prices have dropped 15.9 cents since reaching a 2012 high of $3.936 on April 4. Prices peaked in 2011 at $3.985 on May 5.

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