Bloomberg News

Heating Oil Jumps to 5-Week High as Supply Drops in U.S., Europe

October 14, 2011

Oct. 14 (Bloomberg) -- Heating oil advanced to a five-week high, gaining along with gasoil futures in London, as stockpiles of diesel and heating oil fell in the U.S. and Europe.

Futures in New York rose a fifth consecutive day as U.S. supplies sank to an eight-week low in the seven days ended Oct. 7, the Energy Department reported yesterday. Gasoil inventories in independent storage in Amsterdam-Rotterdam-Antwerp, Europe’s biggest oil-trading hub, slipped 8.1 percent in the week ended yesterday to the lowest level since December 2008, according to PJK International BV, a consultant in the Netherlands.

“The fact we’ve been drawing down ahead of the heating oil season has some people spooked and distillate demand is up on the four-week average against a year ago,” said Peter Beutel, president of trading advisory company Cameron Hanover Inc. in New Canaan, Connecticut. “European gasoil, any strength you have there supports the distillate market.”

November-delivery heating oil rose 8.44 cents, or 2.8 percent, to settle at $3.0558 a gallon on the New York Mercantile Exchange. Prices increased 6.9 percent this week, the largest weekly gain since the period ended Feb. 25.

Gasoil for November delivery climbed 3.4 percent to $952 a ton on the ICE Futures Europe exchange.

Distillate Inventories

U.S. inventories of diesel and heating oil fell 2.93 million barrels to 154 million in the week ended Oct. 7, according to the department, as seasonal maintenance and shutdowns reduced the refinery operating rate 3.5 percentage points to 84.2 percent of capacity, the lowest level since the week ended May 13.

Demand for industrial, trucking and home-heating fuels slipped on a four-week average was 5.6 percent higher than a year earlier.

“Heating oil has been the darling of the market,” Beutel said. “It has the best demand in the oil complex and we’ve seen drawdowns.”

Futures’ gain came amid a broader rally in equities and commodities amid optimism that the Group of 20 nations will develop the means to contain Europe’s debt crisis. Finance ministers and central bankers from the G-20 began talks in Paris, seeking ways to end Europe’s two-year sovereign debt crisis.

“The market seems to be less worried about a major problem with European banks,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Debt Crisis

European officials are considering writedowns of as much as 50 percent on Greek bonds, a backstop for banks and continued central bank bond purchases as key planks in a revamped strategy to combat the debt crisis, people familiar with the discussions said.

The S&P GSCI Index of 24 raw materials rose 2.6 percent at 3:06 p.m. in New York. The Standard & Poor’s 500 stock index advanced 1.3 percent. Crude oil for November delivery in New York gained 3.1 percent to $86.80 as Brent crude on the ICE exchange jumped 3.2 percent to $114.68.

“From what’s coming out of Europe, they seem more determined to capitalize the banks and keep everything from getting out of control,”said Fred Rigolini, vice president of Paramount Options Inc. in New York. “Crude and products are up more than equities today because we saw pretty decent draws in products yesterday.”

Gasoline for November delivery rose 6.72 cents, or 2.4 percent, to settle at $2.8247 a gallon, gaining 6.7 percent for the week. Prices rose every day this week in the longest rally since May.

Regular gasoline at the pump, averaged nationwide, rose 1.7 cents to $3.443 a gallon yesterday, according to AAA data. It was the fourth consecutive gain and the highest level since Sept. 29.

--With assistance from Nidaa Bakhsh in London, James G. Neuger in Brussels, Timothy R. Homan in Washington and Simon Kennedy and Mark Deen in Paris. Editors: David Marino, Richard Stubbe

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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