US heating oil futures fell back to about $3.26 per gallon on Thursday, reversing the previous session’s gains, as traders weighed conflicting geopolitical signals.
On the one hand, Iran and Oman reached an agreement on how to divide control over parts of the Strait of Hormuz and share related revenues. However, Tehran indicated that this deal with Oman alone would not be sufficient to fully reopen the critical shipping route. At the same time, crude oil flows appeared to be resuming out of the Persian Gulf.
On the other hand, downside pressure on prices was limited by escalating tensions in Eastern Europe. Russia is reportedly preparing to step up attacks on Ukraine after concluding that peace talks have reached an impasse. This has fueled worries that Russia may prolong its curbs on refined-product exports, especially as Ukrainian strikes have driven Russian refinery throughput to multiyear lows.
Adding to the bullish undercurrent, the latest EIA data showed US distillate inventories declined by 2.2 million barrels last week, a larger draw than the 1.6 million-barrel reduction analysts had expected, underscoring ongoing tightness in supply.
