Bloomberg News

Heating Oil Advances as Jobless Claims Drop to Three-Year Low

December 30, 2011

Dec. 29 (Bloomberg) -- Heating oil rose as jobless claims slid to a three-year low over the past month and cooler weather was forecast for the U.S. Northeast in January.

Futures gained after Labor Department figures showed the four-week moving average for claims, a less volatile measure than the weekly figures, dropped to 375,000 last week, the lowest level since June 2008. The National Weather Service’s Climate Prediction Center forecast below-normal temperatures Jan. 5-11 from Maine to Florida.

“Not only are we going to have a return of winter but the U.S. economy is improving and that should improve the demand for diesel and even gasoline,” said Phil Flynn, vice president of research at PFGBest in Chicago.

January-delivery heating oil rose 2.41 cents, or 0.8 percent, to settle at $2.9175 on the Nymex. Prices are heading for a 15 percent gain in 2011.

In other indications of a strengthening economy, the Institute for Supply Management-Chicago Inc. said its business barometer was little changed at 62.5 from a seven-month high of 62.6 a month earlier. The index of signed contracts to buy previously owned houses increased 7.3 percent in November, the National Association of Realtors said.

Distillate stockpiles rose 1.21 million barrels to 140.4 million in the week ended Dec. 23, the Energy Department reported today. Inventories of industrial, shipping and heating fuels are 13 percent below year-earlier levels.

Demand for distillates fell 14 percent to 3.8 million barrels a day, the lowest level in four weeks. The four-week average consumption was 3.9 percent above a year earlier.

Refinery Rates

Refiners lowered operating rates 0.7 percentage point to 84.2 percent, the lowest level in seven weeks. Utilization rates in the U.S. East Coast, where three refineries that account for about half of regional capacity are for sale, slid to 56.1 percent from 58 percent.

“There’s some cooler weather forecast and some refinery issues and shutdowns so there’s potential for stronger demand,” said Gordon Elliott, a risk management specialist at FC Stone LLC in St. Louis Park, Minnesota.

Gasoline advanced after the department reported that inventories of the motor fuel declined 692,000 barrels to 217.7 million. Demand rose 0.5 percent from the prior week.

“We did have a stock draw in the middle of winter and a little bit stronger demand this week,” said Sander Cohan, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts.

Gasoline Demand

Measured on a four-week average, gasoline demand was 5.6 percent below a year earlier. The four-week average of total fuel supplied was 7.8 percent below 2010.

“We’re heading for January and that’s the nadir for gasoline demand,” Cohan said.

Gasoline for January delivery rose 2.88 cents, or 1.1 percent, to $2.6801 a gallon. Prices are up 9.2 percent this year, after climbing 41 percent through April 29.

Regular gasoline at the pump, averaged nationwide, climbed 1.1 cents to $3.254 a gallon yesterday, according to AAA data. Prices were 6.3 percent above a year earlier.

--With assistance from Bob Willis in Washington. Editors: David Marino, Margot Habiby

To contact the reporter on this story: Barbara J Powell in Dallas at bpowell4@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net


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