Bloomberg News

Heating Oil Declines on Inventory Increase, China Factory Report

December 01, 2011

Dec. 1 (Bloomberg) -- Heating oil declined after U.S. stockpiles rose the most since January 2009 last week and Chinese manufacturing in November weakened, indicating lower fuel demand.

Prices dropped after the Energy Department reported yesterday that U.S. supplies of heating oil and diesel surged 5.53 million barrels and demand slid 20 percent to the lowest since August 2009. A purchasing managers’ index compiled by the China Federation of Logistics and Purchasing slid to 49 in November from 50.4 the prior month.

“Heating oil is leading the way lower,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We had a bearish inventory report yesterday. In theory, the entire market should be concerned about slowing economic performance around the globe.”

January-delivery heating oil fell 5.56 cents, or 1.8 percent, to settle at $2.9695 a gallon on the New York Mercantile Exchange. Prices declined 0.7 percent last month and are up 17 percent this year. Heating oil peaked at $3.3197 on April 8.

The January contract’s premium to gasoline narrowed 5.51 cents to 41.16 cents a gallon.

“People were heavily long on heating oil and they got blindsided by the build yesterday,” said Phil Flynn, vice president of research at PFGBest in Chicago. “You’re seeing the unwinding of that spread. And the numbers were a little weak on the demand side.”

Gasoline for January delivery fell 0.05 cent to settle at $2.5579 a gallon on the exchange. Prices declined 2.8 percent in November and have risen 4.3 percent this year. Gasoline peaked at $3.4648 on April 29.

Jobless Claims

Labor Department figures showed that jobless claims climbed by 6,000 to 402,000 in the week ended Nov. 26 that included the Thanksgiving holiday. The number of people on unemployment benefit rolls and those getting extended payments increased.

“The Chinese PMI and jobless claims seem to have limited the market’s upward momentum,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Futures fell as global growth, particularly manufacturing, has weakened from China to Europe while in the U.S., the Institute for Supply Management’s factory index rose to 52.7 in November from 50.8 a month earlier. A manufacturing gauge based on a survey of euro-region purchasing managers fell to 46.4, the lowest since July 2009, according to Markit Economics.

“The U.S. at the moment is the global engine of growth,” Evans said. “We’re not really seeing economic acceleration anywhere else. What is there to be bullish about?”

U.S. gasoline inventories increased to an eight-week high last week, increasing 213,000 barrels to 209.8 million barrels.

Demand for the motor fuel rose 2.1 percent to 8.77 million barrels a day, the highest level since the week ended Oct. 7. On a four-week average, gasoline consumption was 2.5 percent below a year earlier.

Regular gasoline at the pump, averaged nationwide, fell 0.3 cent to $3.292 a gallon yesterday, according to AAA data.

--With assistance from Alex Kowalski and Bob Willis in Washington. 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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