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Heating Oil Reaches Three-Month High on Supply Drop, Jobs

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Aug. 9 (Bloomberg) -- Heating oil rose to a three-month high as U.S. distillate inventories fell to 19 percent below a year earlier and a drop in jobless claims indicated the labor market may be stabilizing.

Futures gained as distillate supplies, including heating oil and diesel, fell 724,000 barrels to 123.5 million last week, according to Energy Department data. U.S. applications for unemployment benefits fell 6,000 to 361,000 in the week ended Aug. 3, Labor Department figures showed. Heating oil outperformed crude oil and gasoline on the Nymex.

“This is on the back of the inventories,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “The supply situation is not good for distillates.”

Heating oil for September delivery rose 2.91 cents, or 1 percent, to $3.045 a gallon on the New York Mercantile Exchange, the highest settlement since May 3.

The biggest inventory decline last week, 1.4 million barrels, was in PADD 3, home to Gulf Coast refineries that export diesel to South America and Europe.

“We continue to see distillate inventories draw to the point where they’re close to 20 percent below a year ago going into the winter,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Wholesale demand for heating oil and diesel increased 1.2 percent to 3.79 million barrels a day, the highest level in five weeks. Heating oil futures are traded as a substitute for diesel.

Economist Forecast

The median forecast of 43 economists surveyed by Bloomberg called for jobless claims to increase to 370,000. The department revised the previous week’s figure up to 367,000 from an initially reported 365,000.

“First-time jobless claims is a positive for the economy,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Heating oil’s premium over gasoline widened to 4.42 cents a gallon from 3.55 cents. The crack spread, or premium of heating oil over crude, widened $1.21 to $34.53 a barrel, the highest level since February.

Futures also gained as Brent crude rallied, increasing the cost of oil imported by U.S. refiners and shipments of fuel from Europe.

Brent for September settlement climbed $1.08 to $113.22 a barrel on the London-based ICE Futures Europe exchange. The crude’s premium over U.S. benchmark West Texas Intermediate oil widened $1.07 to $19.86 a barrel.

“They’re being brought up by Brent,” Lipow said. “North sea loadings of crude oil in September are very low because of maintenance and lower production levels.”

North Sea Crude

Loadings of North Sea Forties crude for September are planned at 10 cargoes of 600,000 barrels each, the fewest in at least five years, according to a loading program obtained by Bloomberg News.

Shipments of Brent, Forties, Oseberg and Ekofisk, which make up the Dated Brent benchmark, will total 720,000 barrels a day, the lowest level since August 2007 when Bloomberg started compiling the data, according to the plans.

Gasoline for September delivery rose 2.04 cents, or 0.7 percent, to $3.0008 a gallon on the Nymex.

Regular gasoline at the pump, averaged nationwide, gained 1.5 cents to $3.662 a gallon yesterday, AAA data showed. That’s the highest price since May 24. Prices are higher than a year earlier for the first time since April, according data from the nation’s largest motoring organization.

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

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

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