Heating oil rose to the highest level in almost four months on speculation that a snowstorm in the U.S. Northeast will boost demand for distillates and drain stockpiles on the East Coast.
Futures advanced as the National Weather Service issued blizzard warnings that stretched from Maine to New Jersey, and winter storm warnings and advisories reached south to Virginia and west to Michigan. The storm may increase demand for East Coast distillate supplies, which are at a 10-year seasonal low.
“Heating oil is up because people are worried about the snowstorm,” Carl Larry, president of Oil Outlooks & Opinions LLC, said in a telephone interview from Houston. “If we have a spike on increased demand, supply will shrink a lot faster than anyone could’ve expected.”
Heating oil for March delivery advanced 3.89 cents, or 1.2 percent, to $3.2384 a gallon on the New York Mercantile Exchange, the highest settlement since Oct. 11. Volume was 9.4 percent below the 100-day average at 2:51 p.m. New York time.
The premium of March futures over April weakened 0.07 cent to 2.29 cents a gallon.
East Coast stockpiles of distillates including heating oil and diesel fuel fell 1.22 million barrels to 40.1 million last week, a fourth consecutive decline, according to Energy Information Administration data. It’s the lowest level for the first week of February since 2003.
“There’s also concern because there’s a chance that if the storm gets really bad, we’ll see outages in the New York and New Jersey areas,” Larry said. “That may impact refineries and increase the need for diesel because they will need backup generators.”
The leading edge of the winter storm, which has caused cancellation of at least 4,000 U.S. flights, may leave thousands without power and will probably drop snow by the foot across the Northeast, according to the National Weather Service. Twenty inches (50 centimeters) of snow may fall across eastern Long Island and Connecticut beginning tonight, as temperatures drop.
Phillips 66 is monitoring the storm for impact to operations at the 238,000-barrel-a-day Bayway refinery in New Jersey, while Buckeye Partners LP is making plans to prepare for storm impact on the Eastern section of its pipeline system, the companies said today.
Hess Corp.’s Port Reading refinery and PBF Energy Co.’s Paulsboro site, both in New Jersey, have a combined capacity of 255,000 barrels a day, data compiled by Bloomberg show.
East Coast operations were disrupted by weather last October when Hurricane Sandy, the Atlantic superstorm, made landfall in southern New Jersey, shuttering oil refineries, terminals and gas stations.
“There is a possibility for an impact on the Bayway refinery,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said in a phone interview. “You have to expect that delays are going to occur because of the weather, the ability to import gasoline to the New York region included.”
Gasoline for March delivery gained 5.89 cents to settle at $3.0588 a gallon on Nymex, a four-month high.
Supplies of motor fuel in the Central Atlantic region, known as PADD 1B and including the New York Harbor, increased 3.39 million barrels to 32.4 million last week, the EIA reported.
Gasoline at the pump, averaged nationwide, advanced 1.2 cents to $3.567 a gallon yesterday, AAA said on its website today. That’s the highest level since Oct. 25.