Bloomberg News

Heating Oil Rises to Three-Week High on European Debt Optimism

October 12, 2011

Oct. 12 (Bloomberg) -- Heating oil rose to a three-week high amid optimism that Europe will be able to contain its debt crisis, limiting damage to the regional economy, and as the dollar weakened.

Futures gained as European Union Economic and Monetary Affairs Commissioner Olli Rehn said the region is approaching a consensus on resolving Europe’s debt crisis. The dollar fell 1.1 percent against the euro at 3:19 p.m. in New York, increasing the investment appeal of commodities priced in the U.S. currency.

“There’s a revival of optimism about the European debt crisis,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Heating oil for November delivery rose 3.06 cents, or 1.1 percent, to settle at $2.9347 a gallon on the New York Mercantile Exchange in the first three-day rally since August. It was the highest settlement since Sept. 20.

The premium of heating oil to gasoline widened after a forecast for cooler U.S. weather indicated greater demand for heating fuel. November heating oil was 18.6 cents over the motor fuel, up from 15.65 cents yesterday.

Parts of the U.S. Midwest and East may have low temperatures in the 30s to 40s Fahrenheit (minus 1 to 4.4 Celsius) during the next two weeks, said Matt Rogers, president of the Commodity Weather Group LLC.

Colder Weather

Rogers said the Midwest may have one or two cold nights from Oct. 17 to Oct. 21, while the cooling will reach the East during the Oct. 22 to Oct. 26 period. Parts of the South may also get lower temperatures next week.

“A cooler forecast for the northeast coming next week prompted some buying for heating oil,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

Heating oil’s gain coincided with a broader rally in equities and commodities as European Commission President Jose Barroso called for a reinforcement of crisis-hit banks, the payout of a sixth loan to Greece and a faster start for a permanent rescue fund. The Standard & Poor’s 500 Index rose 1.4 percent at 3:19 p.m. in New York.

European industrial production rose for a second month in August, the European Union’s statistics office in Luxembourg said today, indicating greater demand for U.S. diesel exports. Output in the 17-nation euro area advanced 1.2 percent from July, the biggest gain since November 2010.

Brent, Gasoil

Brent crude oil and gasoil advanced on London’s ICE Futures Europe exchange. Brent oil for November delivery increased 63 cents to $111.36 a barrel. Gasoil for November delivery added $13.25 to $918.50 per metric ton.

“If the European economy stabilizes, that influences diesel prices,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Prices also rose as refineries ran at the lowest level since June. Operating rates probably fell 0.8 percentage point to 86.9 percent last week, according to the median estimate of 14 analysts in a Bloomberg News survey. ConocoPhillips stopped production at its Trainer, Pennsylvania, refinery Sept. 30, saying if it couldn’t find a buyer, the plant would be shut permanently in six months.

The Energy Department is scheduled to report last week’s U.S. inventories at 11 a.m. tomorrow in Washington.

Supplies of diesel and heating oil in the U.S. probably fell 500,000 barrels last week, according to the survey. Gasoline stockpiles were unchanged, and crude oil inventories rose 800,000 barrels.

Gasoline for November delivery gained 0.11 cent to settle at $2.7487 a gallon on the exchange, the highest settlement since Sept. 16.

Regular gasoline at the pump, averaged nationwide, rose 0.9 cent to $3.405 yesterday, according to AAA data.

--With assistance from Brian K. Sullivan in Boston, James G. Neuger in Brussels, Joe Brennan in Dublin and Simone Meier in Zurich. Editors: David Marino, Bill Banker

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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