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Heating Oil and Gasoline Rise as U.S. Supplies Slid Last Week

Nov. 21 (Bloomberg) -- Heating oil and gasoline rose as the Energy Department reported that U.S. product inventories decreased last week.

Futures climbed as distillate supplies, including heating oil and diesel, fell to the lowest level since May 2008 and gasoline inventories declined the most since Aug. 31. Demand for distillates rose to the highest level in 11 months. Futures pared gains along with crude oil after Israel and Hamas agreed to a cease-fire.

“The most bullish part of the report is the continued decline in distillate inventories,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Inventories are 15 percent less than a year ago. If the trend continues, distillate inventories for the winter are going to get tight.”

December-delivery heating oil advanced 3.3 cents, or 1.1 percent, to settle at $3.0722 a gallon on the New York Mercantile Exchange.

Heating oil touched $3.087 before narrowing gains as Israel and the Palestinian militant group Hamas agreed to call a halt to more than a week of air strikes and missile attacks, after talks brokered by Egypt’s Islamist leaders and U.S. Secretary of State Hillary Clinton.

“The oil market would be relieved to hear of a cease fire as it would diminish the possibility of an oil supply disruption in the Middle East,” Lipow said.

Futures rose as distillate supplies fell 2.68 million barrels to 112.8 million in the seven days ended Nov. 16. Demand rose 2.3 percent to 4.2 million barrels a day.

Colder Weather

Commodity Weather Group LLC said yesterday that December in the U.S. may be colder than predicted in its initial seasonal outlook, which would increase demand for energy to heat U.S. homes and businesses this winter. December temperatures are expected to be lower than last year and below the 10-year average, according to the Bethesda, Maryland-based company’s new forecast.

The U.S. exported 1.03 million barrels a day of distillate last week, according to the department’s preliminary estimate.

“Distillate inventories are low,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consultant in London. “Cold weather is coming. Given where stocks are and the forecast, I can’t see the U.S. continuing exports at this level.”

Distillate supplies in Padd 1, which includes New England and the Central Atlantic region, fell 1.63 million barrels to 34.4 million, the lowest since the week ended May 23, 2008. Inventories are 36 percent below year-earlier levels.

Crack Spread

Heating oil’s premium over crude, or the crack spread, based on January contracts, increased 75 cents to $42.03 a barrel, the widest gap since Oct. 31.

“Low distillate inventories in the important consuming region of the East Coast are likely to continue, improving the price for distillates relative to crude and gasoline,” Gareth Lewis-Davies, an oil market strategist at BNP Paribas SA in London, said in a research report today.

Gasoline for December delivery rose 3.7 cents, or 1.4 percent, to settle at $2.7495 a gallon on the exchange.

Stockpiles of the motor fuel fell 1.55 million barrels to 200.4 million barrels in the week ended Nov. 16. Demand declined 10,000 barrels to 8.9 million barrels a day, and over four weeks was 1.6 percent higher than a year earlier.

The average nationwide cost for regular gasoline rose 1.4 cents to $3.426 a gallon, AAA said today on its website. The pump price reached a 2012 high of $3.936 on April 4.

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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