BLBG: Heating Oil Hits 9-Week High as Supplies Expected to Decline
By Barbara Powell
Dec. 29 (Bloomberg) -- Heating oil reached a nine-week high as analysts projected a drop in distillate inventories, and colder weather indicated greater demand for heating fuel in early January.
Supplies of distillates, including heating oil and diesel, probably fell by 2.23 million barrels last week, according to the median estimate of 14 analysts in a survey by Bloomberg News. The U.S. Climate Prediction Center forecast below-normal temperatures from Texas to Maine from Jan. 3 to Jan. 11.
“Heating oil inventories will show a significant decline due to the continuing cold weather that is occurring,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. He projected distillate stockpiles fell 2.7 million barrels.
Heating oil for January delivery rose a fifth straight day, adding 2.93 cents, or 1.4 percent, to settle at $2.1028 a gallon on the New York Mercantile Exchange. It was the highest settlement since Oct. 21.
The front-month heating oil contract has advanced 50 percent this year and prices have more than tripled this decade. The spread between heating oil and gasoline widened to 9.22 cents from 3.57 cents on Dec. 1.
The heating oil crack spread, based on February contracts, or the difference between crude oil and heating oil, widened about 89 cents to $10.03 a barrel.
Supplies of heating oil in the week ended Dec. 18 fell 4.3 percent to the lowest level since July 31. The Energy Department is scheduled to report last week’s inventories tomorrow at 10:30 a.m. in Washington.
‘Arctic Front’
A major arctic front is “set to hit the country now and could last into February,” Jim Andrews, a senior meteorologist at AccuWeather.com., said in a report today.
Gasoline reversed an earlier gain as the dollar rose 0.2 percent to $1.4349 versus the euro at 2:58 p.m. in New York. Inventories of the motor fuel probably rose by 1 million barrels last week, according to the survey.
“The rally we’ve seen the last few days is losing some of its momentum,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
Gasoline for January delivery slipped 0.78 cent, or 0.4 percent, to settle at $2.0106 a gallon, after earlier touching $2.0383, the highest intraday level since Dec. 2.
Prices have risen 99 percent this year and have gained 6.4 percent since the current contract, for reformulated blendstock, or RBOB, began trading in October 2005. RBOB is blended with ethanol before being shipped to retail outlets.
The gasoline crack spread, based on February contracts, was about 44 cents lower at $6.35 a barrel.
Regular gasoline at the pump, averaged nationwide, rose 0.5 cent to $2.608 a gallon, AAA, the nation’s biggest motoring organization, said today on its Web site.
To contact the reporter on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net
