Bloomberg News

Heating Oil Advances on EU Ban of Iran Oil, Refinery Shutdowns

January 23, 2012

Jan. 23 (Bloomberg) -- Heating oil rose on speculation that Europe will import more diesel from the U.S. as European Union foreign ministers agreed to ban oil from Iran starting July 1 and European refiners shut plants.

Futures climbed 0.7 percent after the EU ministers’ decision today. Petroplus Holdings AG and LyondellBasell Industries NV have idled refineries in Europe.

“European distillate demand is over twice that of gasoline,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “We’ve already had a significant loss of distillates in Europe because of the Petroplus refinery shutdowns.”

February-delivery heating oil rose 2.14 cents to settle at $3.0098 a gallon on the on the New York Mercantile Exchange, after touching $3.0356. Futures have increased 2.5 percent this year.

Iran has threatened to close the Strait of Hormuz, which carries about 20 percent of the world’s traded oil, if sanctions are imposed.

“There’s concern that the loss of Iranian oil will tighten supplies of diesel and jet fuel,” said Phil Flynn, vice president of research at PFGBest in Chicago.

In the U.S., demand for diesel and heating oil increased 11 percent to 3.64 million barrels a day in the week ended Jan. 13, according to Energy Department data.

Spread Widens

Heating oil outperformed gasoline, demand for which is at a 10-year low in the U.S. The gap between the two fuels increased 2.79 cents to 23.19 cents a gallon.

“There really aren’t any prospects for gasoline demand this year whereas we do see some prospects for diesel in the U.S. and in Europe and Latin America,” said Andrew Reed, a diesel analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts.

Petroplus, Europe’s largest independent refiner, has shut three plants and is operating two others at reduced rates. Petroplus, trying to avoid bankruptcy, has asked for its shares to be suspended from trading.

Lyondell has decided to shut the 105,000-barrel-a-day Berre refinery in France after failing to find a buyer.

Gasoline for February delivery fell 0.65 cent to settle at $2.7779 a gallon on the exchange, the third consecutive decline since the Jan. 19 Energy Department report on inventories.

Gasoline demand over the four weeks ended Jan. 13 was 6.1 percent below a year earlier, according to department data. Gasoline stockpiles, reached a 10-month high.

“Gasoline is still suffering from the slack demand we’ve seen and the build last week,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

Regular gasoline at the pump, averaged nationwide, fell 0.2 cent to $3.383 yesterday, according to AAA data. Prices were 8.7 percent higher than a year earlier.

--With assistance from Will Kennedy in London and Ewa Krukowska in Brussels and Thomas Penny in Brussels. 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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