Heating oil fell after imports of gasoil to the U.S. East Coast increased, replenishing stockpiles.
Futures slipped as heating oil imports to the PADD 1 region more than tripled to 97,000 barrels a day last week from a week earlier, Energy Department data show. The premium for February delivery over later-month contracts shrank amid heavy volume on speculation more cargoes were heading to the area.
“There’s a lot of talk of cargoes coming in of Russian gasoil and that makes sense, given the price,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “There’s a lot of volume trading.”
Heating oil for February delivery fell 1.56 cents, or 0.5 percent, to settle at $3.0543 a gallon on the New York Mercantile Exchange. Volume was more than double the 100-day average.
Higher-than-normal volumes of calendar spreads traded, which narrowed the premium of February contracts over March and March over April. The February-March spread shrank 0.77 cent to 0.87 cent a gallon, with 38,632 lots changing hands, more than double the average of 17,161 during the week ended yesterday. The March-April gap narrowed 0.91 cent to 1.33 cents.
Heating oil supplies in PADD 1 were 40 percent below a year earlier as of Jan. 4, department data show.
Futures earlier touched $3.1137, the highest intraday level since Oct. 30, on forecasts for colder weather in the eastern U.S. and as gasoil rallied in Europe. Gasoil jumped as temperatures dropped and amid speculation that rising inventories and lower refining margins will lead to run cuts. Higher gasoil prices may attract diesel shipments from the U.S.
The U.S. Climate Prediction Center estimated temperatures will be normal to lower-than-normal across the Northeast from Jan. 15 through Jan. 23.
“Cold weather in Europe coupled with the return of winter to the U.S. Northeast has given a boost to products,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
Low temperatures in Frankfurt are forecast to drop to minus 9 degrees Celsius (16 Fahrenheit) on Jan. 16 from 4 degrees today, according to CustomWeather Inc. data on Bloomberg.
Gasoil for February delivery advanced $10.50 to settle at $959.25 per metric ton on the ICE Futures Europe exchange in London.
“Gasoil has been rallying on cold weather in Germany,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Stockpiles of gasoil in independent storage rose 5.1 percent to a three-month high in Europe’s Amsterdam-Rotterdam-Antwerp trading hub during the week ended today, according to PJK International BV. Gasoil’s premium over Brent crude, or the crack spread, sank to $13.32 a barrel Dec. 31, the lowest level since May 21 for the contracts nearest to expiration.
“The risk of a run cut in Europe are quite high as inventories increase and it’s a risk in the U.S. as well,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London. “Yesterday, given how little heating oil reacted to the inventory numbers, you could be getting a reaction today to the stats from yesterday,” Sen said.
Gasoline for February delivery advanced 1.44 cents, or 0.5 percent, to $2.7933 a gallon.
The average nationwide retail price for regular gasoline gained 0.6 cent to $3.31 a gallon, AAA said today on its website. That’s the highest price since Dec. 11.