FX.co ★ Heating Oil Market Tightens as US Inventories Hit Record Low

US heating oil prices are holding near $4.25–$4.50 per gallon, more than 80% higher than a year ago, as supplies drop to their lowest seasonal level on record. US distillate inventories, which include diesel and heating oil, fell to 103.4 million barrels in the week ending August 21, the lowest level for this time of year since comparable data began in the early 1980s. The situation is especially worrisome because demand typically climbs in the autumn, driven by winter heating needs, Northern Hemisphere crop harvests, and Southern Hemisphere planting.

Global refined-fuel flows have been further disrupted by the Iran war’s impact on shipments through the Strait of Hormuz, Russia’s suspension of diesel exports, and continued Ukrainian attacks on refineries, all of which are tightening worldwide supply. US refiners are capitalizing on exceptionally strong demand, with diesel refining margins at record highs and exports surging. Even so, the increase in US shipments is still not enough to fully offset the global shortfall in supply.