FX.co ★ Heating Oil Holds Near July Highs

Heating oil futures in the U.S. have reached approximately $2.49 per gallon, marking their highest levels since July. This rise is attributed to tighter balances in the distillate market, overshadowing the pressure from declining crude prices. In the week ending on October 31st, U.S. distillate inventories experienced a reduction of 643 thousand barrels, signaling the fifth consecutive week of declines. This trend has resulted in stocks remaining significantly below typical seasonal levels, diminishing the reserve cushion usually held by refiners and distributors in preparation for winter.

Conversely, U.S. crude inventories saw an increase of about 5.2 million barrels. However, this additional supply has not led to a surge in distillate production. Factors contributing to this include reduced refinery operations and lower diesel yields, alongside a lag in net production observed in recent weeks. Moreover, strong export flows have tightened domestic availability by redirecting domestic barrels to overseas markets. Simultaneously, colder weather is boosting demand for seasonal heating and diesel.