Bloomberg News

Heating Oil Declines as Iran Embargo Delay Eases Supply Concern

January 16, 2012

Jan. 13 (Bloomberg) -- Heating oil fell for a third day as European Union sanctions on Iran may be delayed to allow countries to find alternative sources of crude, ensuring supply for refiners to produce the fuel.

Heating oil declined 0.9 percent as the EU’s embargo on Iranian oil imports will probably be delayed for six months, according to two EU officials with knowledge of the talks. Lower supply to European refineries could limit fuel production in the continent which consumes more diesel than gasoline.

“Before we thought there was going to be an imminent oil embargo that would’ve driven up the price of diesel over gasoline,” said Phil Flynn, vice president of research at PFGBest in Chicago.

February-delivery heating oil declined 2.69 cents to settle at $3.0272 a gallon on the New York Mercantile Exchange, after dropping to $3.023. Futures sank 1.4 percent this week.

Prices also declined amid reports that Standard & Poor’s may downgrade the credit ratings of European countries including France and Austria.

The S&P 500 fell 0.8 percent to 1,285.71 at 2:39 p.m. in New York, paring its weekly gain to 0.6 percent.

The possible downgrades “added to the chatter of Iran diminishing,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Gasoline for February delivery rose 0.29 cent to $2.7342 a gallon on the exchange.

Spread Reversal

As the prospect of sanctions drew closer, traders bought heating oil as a proxy for European diesel and sold gasoline, Flynn said. “This could be a reversal of the heating oil gasoline spread.”

EU members, including France and Germany, have pushed for an embargo to pressure Iran over its nuclear program. Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, pumped 3.58 million barrels of crude a day last month, according to Bloomberg News estimates.

Regular gasoline at the pump, averaged nationwide, rose 0.9 cent to $3.391 a gallon yesterday, according to AAA data. Prices are the highest since Nov. 16.

--Editors: David Marino, Charlotte Porter

To contact the reporter on this story: Paul Burkhardt in New York at

To contact the editor responsible for this story: Dan Stets at

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