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Heating Oil Gains on Colder Weather Outlook and Export Demand

Jan. 14 (Bloomberg) -- Heating oil rose the most since November on speculation that cold weather in the U.S. will boost demand for the fuel and that higher gasoil prices in Europe will attract distillate shipments.

Futures jumped 1.8 percent as the National Weather Service’s Climate Prediction Center estimated temperatures will be lower than normal across the Northeast from Jan. 19 through Jan. 27. Gasoil rallied in Europe as the cold deepened across the continent.

“This time of the year it’s supported by colder weather,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Gasoil tends to draw up heating oil since Europe is a large importer of U.S. distillate.”

Heating oil for February delivery rose 5.4 cents to settle at $3.0625 a gallon on the New York Mercantile Exchange, the largest increase since Nov. 19. Volume was 6.4 percent below the 100-day average.

Heating oil’s premium over WTI, or the crack spread, widened $1.69 to $34.49 a barrel. It was the largest gain since June 26.

Heating oil supplies in PADD 1 were 40 percent below a year earlier as of Jan. 4, according to data from the Energy Department’s Energy Information Administration.

The Climate Prediction Center said there is a 60 percent chance that below-normal temperatures will persist at least until Jan. 27. Computer models show that temperatures across the East Coast and Midwest will be 5 degrees Fahrenheit (2.8 Celsius) below normal from Jan. 19 to Jan. 23, said Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland.

Temperature Drop

Temperatures in Frankfurt are forecast to drop to minus 6 degrees Celsius (21 Fahrenheit) on Jan. 19 from minus 1 today. Germany is Europe’s largest heating oil market, according to data from CustomWeather Inc. Freezing weather is also predicted for London, Paris and Amsterdam this week, according to weather forecasts compiled by Bloomberg.

“Europe has been the driver and mix in little colder weather in the U.S. it makes it more competitive in price,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Gasoil for February delivery rose $14.75 to settle at $954.50 a metric ton on the ICE Futures Europe exchange in London. Prices continued higher to $961.75 at 2:30 p.m. in New York.

Gasoline for February delivery gained 1.46 cents, or 0.5 percent, to $2.7541 a gallon on the exchange.

The average nationwide retail price for regular gasoline fell 0.3 cent to $3.304 a gallon, AAA said today on its website. That’s the third consecutive decline.

To contact the reporter on this story: Barbara 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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