Bloomberg News

Heating Oil, Gasoline Gain on Speculation U.S. Economy Stronger

November 29, 2011

Nov. 29 (Bloomberg) -- Heating oil and gasoline rose as a gain in retail sales increased confidence that the U.S. economy is strengthening and fuel demand will improve.

Futures advanced as U.S. sales at stores open at least a year rose 5.4 percent in the week ended Nov. 26 from a year earlier, according to Johnson Redbook Research. Consumer confidence climbed in November by the most since April 2003, according to a report from a private research group.

“The Redbook retail sales report is confirming what we’re seeing at the malls and it’s another sign the U.S. economy is doing well,” said Phil Flynn, vice president of research at PFGBest in Chicago.

December-delivery heating oil advanced 5.12 cents, or 1.7 percent, to settle at $3.0211 a gallon on the New York Mercantile Exchange. The more actively traded January contract rose 5.09 cents, or 1.7 percent, to $3.0336.

Gasoline for December delivery gained 2.1 cents, or 0.8 percent, to settle at $2.5391 a gallon on the exchange. The January contract advanced 2.21 cents, or 0.9 percent, to $2.5398.

December heating oil and gasoline contracts will expire at the end of floor trading tomorrow.

Heating oil’s premium to gasoline widened 3.02 cents to 48.2 cents on speculation inventories of diesel and heating oil declined to the lowest level in almost three years.

Inventory Survey

Distillate inventories probably fell 1.25 million barrels last week to 131.7 million, the lowest level since December 2008, according to the median estimate of 12 analysts in a survey by Bloomberg News. Gasoline stockpiles rose 1.45 million barrels to an eight-week high, the survey showed.

“There’s tightness in distillate supplies in Europe and China and we’re now a net exporter of distillate inventory, filling the void for other places,” said Phil Flynn, vice president of research at PFGBest in Chicago.

Same-store sales are considered the best measure of a retailer’s results because they exclude the effect of store openings and closings in the past year.

The National Retail Federation reported Nov. 27 that Thanksgiving holiday sales at shopping malls gained 16 percent.

Retail sales totaled a record $52.4 billion during the holiday weekend and the average shopper spent $398.62, up from $365.34 a year earlier, the Washington-based National Retail Federation said, citing a survey conducted by BIGresearch.

Consumer Confidence

Reinforcing the improved retail sales, the Conference Board’s index increased to 56 from a revised 40.9 reading in October. Confidence increased as Americans grew more upbeat about employment and income prospects, according to the survey.

“The macro economic data out of the U.S. was better than expected, and there’s nothing negative out of Europe right now,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

European finance ministers from the 17-member monetary union are meeting in Brussels today to debate using their bailout find to insure sovereign debt with guarantees.

Prices also gained as crude oil rose on concern Middle East oil supplies would be disrupted after Iranian protesters stormed the British Embassy’s compound in Tehran, a week after the U.S. and U.K. imposed additional sanctions on the country over Iran’s nuclear program.

Crude oil for January delivery rose $1.58 to settle at $99.79 a barrel on the Nymex. Brent oil for January settlement gained $1.82 to $110.82.

“Worries about Iranian oil supplies appears to be aiding the bullish sentiment today,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Regular gasoline at the pump, averaged nationwide, was unchanged at $3.295 a gallon yesterday, according to AAA data.

--With assistance from Chris Middleton, Timothy R. Homan and Margaret Talev in Washington, Patrick Donahue in New York, Caroline Alexander in London and Ladane Nasseri in Dubai. 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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