Heating oil advanced to a three-month high as U.S. inventories of distillate fuels declined and demand climbed to the highest level in five weeks.
Futures rose a fourth straight day as the Energy Department reported that supplies of distillates, including heating oil and diesel, fell 724,000 barrels to 123.5 million last week. Analysts forecast a 250,000-barrel gain. Wholesale demand increased 1.2 percent to 3.79 million barrels a day. Heating oil is traded as a substitute for diesel.
“You had a decline in diesel stocks and strong demand,” said Sander Cohan, a global transportation fuels analyst and principal with Energy Security Analysis Inc. in Wakefield, Massachusetts. “We’re assuming strong exports and winter is coming.”
Heating oil for September delivery rose 1.79 cents, or 0.6 percent, to $3.0159 a gallon on the New York Mercantile Exchange, the highest settlement since May 3. The September contract has gained 6.1 percent in four days of advances.
Supplies of heating oil and diesel are 19 percent below a year earlier, according to department data.
“We’ve seen distillate inventories continue to decline and we’re continuing to see the effects this year of the refinery shutdowns in the Northeast and the Caribbean, which would normally supply our markets,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
The biggest decline, 1.4 million barrels, was in PADD 3, home to Gulf Coast refineries that export diesel to South America and Europe.
The crack spread, or premium of heating oil over crude, based on September contracts, widened $1.13 to $33.32, the largest gap since February.
“Distillate stock levels are tight relative to the five-year average and export demand is good right now,” said Jim Colburn, a vice president at Jefferies Bache LLC in New York. “We’re getting beyond the gasoline season and already starting to look ahead.”
Gasoline for September delivery fell 1.09 cents, or 0.4 percent, to settle at $2.9804 a gallon on the Nymex.
Supplies dropped 1.8 million barrels to 206.1 million. The largest portion of the decline occurred in PADD 1, where stockpiles sank 1.14 million barrels to 51.7 million, the lowest level since November. Changes in PADD 1 inventories can affect futures prices because the region includes New York Harbor, the delivery point for the Nymex contract.
“We saw gasoline inventories drew once again this week and now they’re 3 percent to 4 percent lower than this time last year,” Lipow said.
Gasoline demand rose 0.2 percent to 8.84 million barrels a day, the third consecutive gain. Consumption over the past four weeks was 4.2 percent below a year earlier.
Regular gasoline at the pump, averaged nationwide, gained 1.3 cents to $3.647 a gallon yesterday, AAA data showed. That’s the highest price since May 25. Prices have climbed 16.2 cents in 10 days of increases and are down 7.3 percent from a 2012 high of $3.936 on April 4, according data from the nation’s largest motoring organization.