Heating oil rose to the highest level in nearly four months on speculation that a snow storm in the U.S. Northeast will boost demand for distillates and drain stockpiles on the East Coast.
Futures advanced as the National Weather Service issued blizzard warnings that stretched from Maine to New Jersey, and winter storm warnings and advisories reached south to Virginia and west to Michigan. That may increase demand for distillates and draw from East Coast supplies, which slipped almost 3 percent in the week ended Feb. 4, according to Energy Information Administration data.
“Heating oil is up because people are worried about the snow storm,” Carl Larry, president of Oil Outlooks & Opinions LLC, said in a telephone interview from Houston. “If we have a spike on increased demand, supply will shrink a lot faster than anyone could’ve expected.”
Heating oil for March delivery advanced 4.69 cents, or 1.5 percent, to $3.2464 a gallon on the New York Mercantile Exchange at 10:21 a.m., the highest level since Oct. 11. The futures earlier touched as high as $3.2575, which would’ve been the highest since March 19. Volume was 2.7 percent below the 100-day average at 10:25 a.m. New York time.
The premium of March futures over April rose 0.19 cent to 2.45 cents a gallon.
Stockpiles of distillates including heating oil and diesel fuel fell 1.22 million barrels to 40.1 million last week, a fourth consecutive weekly decline, EIA data show. That’s also the lowest seasonal level in at least 10 years, according to data compiled by Bloomberg.
“There’s also concern because there’s a chance that if the storm gets really bad, we’ll see outages in the New York and New Jersey areas,” Larry said. “That may impact refineries and increase the need for diesel because they will need backup generators.”
The leading edge of the winter storm, which has caused cancellation of at least 3,800 U.S. flights, may leave thousands without power and will probably drop snow by the foot across the Northeast, according to the National Weather Service. Up to 20 inches of snow may fall across eastern Long Island and Connecticut beginning tonight, as temperatures drop.
Phillips 66 (PSX:US) is monitoring the storm for impact to operations at the 238,000-barrel-a-day Bayway refinery in New Jersey, while Buckeye Partners LP (BPL:US) is making plans to prepare for storm impact on the Eastern section of its pipeline system, the companies said today.
Hess Corp.’s Port Reading refinery and PBF Energy Co.’s Paulsboro site, both in New Jersey, have a combined capacity of 255,000 barrels a day, data compiled by Bloomberg show.
East Coast operations were disrupted by weather on Oct. 29 when Hurricane Sandy, the Atlantic superstorm, made landfall in southern New Jersey, shuttering oil refineries, terminals and gas stations in the region.
“There is a possibility for an impact on the Bayway refinery,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said in a phone interview. “You have to expect that delays are going to occur because of the weather. The ability to import gasoline to the New York region included.”
Gasoline for March delivery gained 4.6 cents, or 1.5 percent, to $3.0461 a gallon on Nymex at 10:17 a.m. Volume was 1.1 percent higher than the 100-day average.
Supplies of motor fuel in the Central Atlantic region, known as PADD 1B and including the New York Harbor, increased 3.39 million barrels to 32.4 million last week, the EIA reported.
Gasoline at the pump, averaged nationwide, advanced 0.3 percent to $3.567 a gallon, AAA said on its website today. That’s the highest level since Oct. 25.
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