Bloomberg News

Heating Oil, Gasoil Gain on Middle East, Colder Weather Outlook

November 19, 2012

Heating oil rose, along with gasoil, amid concern that Israel’s attacks on the Gaza Strip may spread unrest in the Middle East, disrupting oil supplies, and as colder weather was forecast for the U.S. and Europe.

Futures reached a one-month high as Israeli Defense Minister Ehud Barak said air attacks on Gaza may expand to ground operations amid an escalating conflict with the Islamist Hamas movement. The approaching cold finds U.S. distillate stocks at the lowest seasonal level since 2000 and gasoil supplies at an 11-month low, increasing demand for U.S. cargoes.

“Now, winter demand is kicking in and heating oil and gasoil stocks are low,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consultant in London. “There is no oil loss because of the Israel conflict, but the general rhetoric can spook the market and other countries could get dragged into it.”

December-delivery heating oil rose 8.83 cents, or 3 percent, to $3.0751 a gallon on the New York Mercantile Exchange, the biggest gain since Oct. 4 and highest settlement since Oct. 30. December gasoil rose $31.5 to $952 a metric ton on the ICE Futures Europe exchange in London.

Gasoil inventories in independent storage in Amsterdam- Rotterdam-Antwerp, Europe’s oil-trading hub, fell 5.4 percent in the week ended Nov. 15 to 1.84 million metric tons, the lowest level since January, according to PJK International BV, a consultant in the Netherlands.

U.S. inventories of distillates, including heating oil and diesel, dropped 2.2 percent in the seven days ended Nov. 16 to 115.5 million barrels, the lowest for this time of the year since 2000, Energy Department data show.

Europe, U.S.

Sections of Western Europe, including the U.K. and Spain, will probably face lower-than-normal temperatures in the next three months, forecaster WSI Corp. said.

In the U.S., December’s weather will start off cooler than normal along the U.S. East Coast, said Matt Rogers, president of Commodity Weather Group LLC. Winter, measured by meteorologists from Dec. 1 to Feb. 28, may be 21 percent cooler than last year in terms of natural gas-weighted heating degree days, Rogers said. Last winter was the fourth-warmest on record in the contiguous 48 states.

Heating oil’s premium to West Texas Intermediate crude on Nymex, based on January contracts, jumped $1.37 to $40.22 a barrel. The January gasoil crack spread over Brent oil on ICE jumped $1.38 to $16.29 a barrel.

Israel Conflict

Israeli ground forces are poised to invade the Gaza Strip for the first time in almost four years amid efforts by Egypt and Turkey to help end exchanges of fire that have killed 96 Palestinians and three Israelis.

The decision whether to expand the Gaza operation or reach a cease-fire agreement “is rapidly approaching, and is a matter of hours, not even days,” Israeli Finance Minister Yuval Steinitz said in an interview today on Army Radio.

Futures also rose on optimism U.S. lawmakers can reach a budget compromise and avoid the so-called fiscal cliff, automatic tax increases and spending cuts scheduled to take effect next year.

“Everybody thinks we’re going to get through the fiscal cliff,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “And with the risk over Israel, no one wants to be short.”

Budget Talks

President Barack Obama is negotiating with a divided Congress to try and avert $607 billion in automatic tax increases and spending cuts. Obama told reporters during a news conference in Bangkok yesterday that “I am confident we can get our fiscal situation dealt with.”

“The number one reason for the increase is the unrest in the Middle East and fear of that spreading and ultimately leading to supply disruption,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “There’s also optimism that Congress will come to a compromise on the budget talks.”

Sales of existing houses U.S. homes climbed in October, increasing optimism that the economy will be stronger in 2013. Purchases of previously owned homes rose 2.1 percent to a 4.79 million annual rate, figures from the National Association of Realtors showed. The median price increased from a year ago as inventories dropped to the lowest in almost a decade.

“This is another sign the housing market is recovering,” Flynn said.

Gasoline for December delivery rose 4.44 cents, or 1.6 percent, to $2.7545 a gallon on the New York Mercantile Exchange, the highest settlement this month.

The average nationwide cost for regular gasoline slipped 0.2 cent to $3.416 a gallon, AAA said today on its website. That’s the lowest price since July 16. The pump price reached a 2012 high of $3.936 on April 4.

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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