FX.co ★ Heating Oil Futures Halt 4-Day Rally

U.S. heating oil futures recently experienced a decline of over 4%, settling at $2.55 per gallon. This decrease comes after a 12.4% increase over the past four days, which had pushed prices to a 10-week high of $2.67 per gallon. The market's assessment suggests that the peak cold period in the U.S. has ended, coinciding with an unexpected rise in inventories. Specifically, distillate stockpiles—which include diesel and heating oil—expanded by 329,000 barrels, deviating from the anticipated 550,000-barrel reduction. Additionally, heating oil inventories increased by 26,000 barrels, following a more substantial build the previous week. According to the Commodity Weather Group, weather forecasts predict slightly colder conditions in the eastern U.S. during the first week of February, followed by a warming trend in northern areas. Despite the recent dip, heating oil futures remain over 20% higher in January, driven by demand spurred by earlier cold weather, refinery disruptions, and an increased use of fuel oil for power generation. These factors stem from heightened electricity demand and elevated natural gas prices that have prompted fuel switching.