FX.co ★ Heating Oil Pares Winter Rally

US heating oil futures have retreated to below $2.55 per gallon following a significant rally driven by winter demand, which had elevated prices to their highest levels in two months. This pullback is primarily due to profit-taking after a notably extended price surge. Initially, prices had surged in reaction to the risk of peak cold weather, refinery limitations, and potential supply disruptions. However, with these factors already priced in and no new market shocks emerging, further price increases appear constrained. As the momentum in crude oil markets has stalled and the spread between distillate and crude prices has ceased expanding, traders are opting to secure profits, prompting a broader movement to mitigate risks in the winter fuel markets. This trend mirrors the sudden reversal recently observed in US natural gas markets. Despite ongoing strong demand for heating oil due to cold weather and tight inventories, weather forecasts have stabilized, suggesting that the recent upward price pressures have been fully realized.