Heating oil fluctuated on forecasts for colder weather, which could boost demand, and speculation that foreign gasoil cargoes will arrive in the U.S. East Coast, increasing inventories.
Futures swung between a 1.4 percent gain and a 0.3 percent decline. The U.S. Climate Prediction Center estimated temperatures will be normal to lower-than-normal across the Northeast from Jan. 15 through Jan. 23. The premium of February futures over later-month delivery shrank amid higher-than-normal volume on optimism supplies will increase.
“There’s a lot of talk of cargoes coming in of Russian gasoil and that makes sense, given the price,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “There’s a lot of volume trading.”
Heating oil for February delivery rose 0.38 cent to $3.0737 a gallon at 1:16 p.m. on the New York Mercantile Exchange. Volume was more than double the 100-day average.
Imports of heating oil, tripled to 97,000 barrels a day last week from a week earlier, Energy Department data show.
Higher-than-normal volumes of calendar spreads traded, which narrowed the premium of February contracts over March and March over April. The February-March spread shrank 0.65 cent to 0.99 cent a gallon, with 34,855 lots changing hands, compared with an average of 17,161 over the week through yesterday. The March-April gap narrowed 0.75 cent to 1.49 cents.
Futures earlier touched $3.1137, the highest intraday level since Oct. 30, as gasoil rallied in Europe on colder weather and speculation that rising inventories and lower refining margins will lead to run cuts. Higher gasoil prices may attract diesel shipments from the U.S.
“Cold weather in Europe coupled with the return of winter to the U.S. Northeast has given a boost to products,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
Low temperatures in Frankfurt are forecast to drop to minus 9 degrees Celsius (16 Fahrenheit) on Jan. 16 from 4 degrees today, according to CustomWeather Inc. data on Bloomberg.
Gasoil for February delivery advanced $9 to $957.75 per metric ton on the ICE Futures Europe exchange in London.
“Gasoil has been rallying on cold weather in Germany,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Stockpiles of gasoil in independent storage rose 5.1 percent to a three-month high in Europe’s Amsterdam-Rotterdam- Antwerp trading hub during the week ended today, according to PJK International BV. Gasoil’s premium over Brent crude, or the crack spread, sank to $13.32 a barrel Dec. 31, the lowest level since May 21 for the contracts nearest to expiration.
“The risk of a run cut in Europe are quite high as inventories increase and it’s a risk in the U.S. as well,” Sen said. “Yesterday, given how little heating oil reacted to the inventory numbers, you could be getting a reaction today to the stats from yesterday,” Sen said.
Inventories of heating oil and diesel in the U.S. rose 6.78 million barrels last week to the highest level since April 6, according to Energy Department data.
“This was a gasoil driven move in the first place,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London. “Heating oil might underperform gasoil given the levels of inventory build.”
Gasoline for February delivery advanced 2.3 cents, or 0.8 percent, to $2.8019 a gallon on the exchange.
The average nationwide retail price for regular gasoline gained 0.6 cent to $3.31 a gallon, AAA said today on its website. That’s the highest price since Dec. 11.
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