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Heating Oil Falls as Budget Deadlock Drives Worries on Demand

Dec. 24 (Bloomberg) -- Heating oil fell in below-average trading volume as concerns grew that American lawmakers will miss a year-end deadline to avoid triggering spending cuts, which could damp fuel demand.

Futures sank 0.7 percent as Senator Joseph Lieberman said that time is running out for U.S. congressional leaders and President Barack Obama to agree on a budget deal to avoid more than $600 billion in automatic tax increases and spending cuts known as the fiscal cliff. Volume was 52 percent below the average of the past 100 days, data compiled by Bloomberg show.

“There’s a growing expectation that we may not resolve the fiscal cliff this year,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone. “Neither Republicans or Democrats seem to be serious about spending cuts, and it’s difficult to reduce the deficit without those. That, I think, is ultimately bearish for the market.”

January-delivery heating oil dropped 2.02 cents to settle at $3.0022 a gallon on the New York Mercantile Exchange.

Nymex trading ended at 1:30 p.m. today, an hour earlier than normal. There’s no floor trading tomorrow because of the Christmas holiday and all electronic transactions will be booked for Dec. 26 for settlement purposes.

Gasoline for January delivery rose 1.59 cents, or 0.6 percent, to settle at $2.7506 a gallon. Prices rallied, after dropping 0.8 percent earlier, as Philadelphia Energy Solutions idled an isomerization unit and debutanizer unit at the Girard Point section of its 355,000-barrel-a-day refinery.

Volume was 67 percent below average.

Light Volume

“It’s very light trading conditions, and maybe that news reminded traders that the plant is going into turnaround,” Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York, said in a phone interview.

A 60-day turnaround at the Philadelphia refinery is scheduled to begin by the end of the month, a person familiar with operations said Dec. 11. The Carlyle Group LP owns a controlling interest in the plant, which is the largest by crude processing capacity on the U.S. East Coast.

Stockpiles of distillate fuel, a category that includes diesel and heating oil, probably decreased 1 million barrels in the week ended Dec. 21 to 116 million, according to the median of nine analyst estimates surveyed before an Energy Department report on Dec. 28. Seven respondents forecast a drop and two expected an advance. Supplies declined 1.09 million barrels the previous week.

The Bloomberg survey also showed gasoline supplies probably rose 700,000 barrels to 220 million. Five respondents projected a gain and four forecast a drop. Inventories grew 2.21 million the previous week to 219.3 million barrels.

Regular gasoline at the pump, averaged nationwide, rose 0.1 cent to $3.247 a gallon, AAA said today on its website. It’s the fourth increase in a row after prices fell 28 straight days.

To contact the reporter on this story: Dan Murtaugh in Houston at

To contact the editor responsible for this story: Dan Stets at

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