FX.co ★ Heating Oil Drops

Heating oil futures saw a slight decline, settling around $2.55 per gallon, following a recent five-month peak of $2.60 noted on June 19th. This adjustment came in the wake of President Trump's statement delaying any U.S. involvement in the Israel-Iran conflict for up to two weeks, thereby alleviating immediate concerns about a potential supply shock from the Middle East. However, fundamental market drivers continue to be robustly supportive. Ultra-low-sulfur diesel futures, closely linked to heating oil's distillate base, remain high due to apprehensions that strikes in Tehran could disrupt traffic through the Strait of Hormuz and impact Gulf exports. Additionally, U.S. crude oil inventories saw a significant reduction of 11.5 million barrels for the week ending June 13th—the largest drawdown in a year. Refineries have been operating at nearly full capacity to cater to demands for diesel, marine fuel, and summer-blend gasoline, leading to minimal excess product availability. Further influencing the market, war-risk premiums on tanker freight and insurance, combined with elevated feedstock costs and the risk of further geopolitical tensions, continue to drive speculative interest, thereby curbing any significant drop in heating oil prices.