FX.co ★ Heating Oil Halts Rebound

U.S. heating oil futures have declined to approximately $2.16 per gallon, stalling their recovery from the four-year low of $1.975 per gallon recorded on May 7th. This shift has primarily resulted from declines in crude oil benchmarks, driven by renewed concerns over global oversupply. Notably, Iran's willingness to pursue a sanctions-relief agreement has increased expectations of a rise in its oil exports. In addition, a surprising 3.4 million-barrel increase in U.S. crude inventories has deepened these concerns. OPEC's reduced forecast for 2025 non-OPEC+ supply growth, now pegged at 800,000 barrels per day compared to the previous 900,000 barrels per day, along with intentions for increased output, have further contributed to downward market pressure. However, the decline in heating oil prices has been less severe, largely due to tightening supplies of distillates and robust demand. Additionally, the 90-day tariff truce between the U.S. and China has improved growth prospects and supported energy markets. In April, China's crude imports rose by 7.5% year-on-year, decreasing middle distillate inventories. Moreover, data from the Energy Information Administration (EIA) revealed a 3.16 million-barrel reduction in U.S. distillate inventories, in contrast to a modest 290,000-barrel increase in heating oil stocks up to May 9th.