Bloomberg News

Heating Oil Gains on Forecasts for Colder Weather in Northeast

January 18, 2013

Heating oil gained on forecasts for colder-than-normal weather in the U.S. Northeast next week at a time when supplies of the fuel are declining.

Futures rose 1 percent as temperatures in the Northeast and eastern Canada are expected to fall 8 to 14 degrees below normal from Jan. 23 to 27, according to MDA Weather Services in Gaithersburg, Maryland. East Coast heating oil supplies fell a fifth consecutive week through Jan. 11 and are 42 percent below a year earlier, data from the U.S. Energy Information Administration show.

“Heating oil continues to be supported by cold weather in the U.S. and Europe,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Heating oil for February delivery rose 3.13 cents to settle at $3.0525 a gallon on the New York Mercantile Exchange. Volume was 18 percent below the average of the past 100 days. Prices rose 1.5 percent this week.

There will be no Nymex floor trading on Jan. 21 in observance of the Martin Luther King Jr. holiday in the U.S.

The premium of February delivery futures over the March contract increased 0.39 cent to 1.06 cents a gallon, the largest gap since Jan. 9. The increasing backwardation can indicate greater demand for near-term delivery or tighter supply.

Temperatures in the Northeast are expected to drop 8 degrees Fahrenheit (4.4 Celsius) next week before returning to seasonal levels in about 10 days, according to Matt Rogers, president of the Commodity Weather Group LLC. That may be just a lull before the next cold blast arrives, said Rogers from his office in Bethesda, Maryland.

Lower Temperatures

The National Weather Service’s Climate Prediction Center estimated lower-than-normal temperatures in the Northeast from Jan. 23 to Jan. 27. The region accounts for about 80 percent of households that use heating oil, according to the EIA.

Upcoming winter and spring refinery maintenance may reduce product inventories. Motiva Enterprises LLC will shut a crude unit, a delayed coker and a sulfur recovery unit at the Port Arthur, Texas, refinery Feb. 17 for a 38-day maintenance turnaround, two people familiar with operations said.

“We have turnarounds coming up and Europe is cold and the six-to 10-day forecast looks colder than normal,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York.

U.S. refinery utilization fell 1.2 percentage points last week to 87.9 percent, the lowest level in eight weeks, according to EIA data. Between now and May, an average 1.5 million barrels a day of U.S. refinery capacity will be shut for maintenance, according to Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London.

Refinery Maintenance

“Refineries are being taken down for maintenance,” Sen said. “The Motiva maintenance is important because that’s capacity that had been in the market that will be taken out.”

Gasoline for February delivery rose 2.84 cents, or 1 percent, to $2.7968 a gallon, the highest settlement since Jan. 3. Volume was 28 percent below the average. Prices advanced 2.1 percent this week, the first gain in three weeks.

The retail price for regular gasoline, averaged nationwide, rose 0.1 cent to $3.293 a gallon, AAA said today on its website. That’s the first increase in seven days.

To contact the reporter on this story: Barbara 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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