FX.co ★ Heating Oil Hovers at 2-Week Highs

In July, heating oil futures rose to approximately $2.44 per gallon, reaching levels not seen in two weeks. This increase is attributed to higher crude oil feedstock costs, which have boosted refining margins and supported the value of distillates. Refiners are currently dealing with tighter sweet crude differentials and are operating at higher capacities to meet the peak summer demands for transportation and power generation. Consequently, the increased input costs have been transferred to heating oil prices. Although the International Energy Agency (IEA) has cautioned about a possible surplus later in the year and OPEC+ still retains the ability to increase production, prevailing market conditions—characterized by robust short-term demand and stronger crude oil benchmarks—are pushing prices higher. Additional upward pressure is caused by ongoing refinery maintenance on the U.S. East Coast, which has taken approximately 500,000 barrels per day of distillation capacity offline, leading to a tightening of middle-distillate supply despite a focus by refiners on gasoline production. Further exacerbating supply issues are Houthi-linked attacks in the Red Sea that have interrupted bunker fuel flows to Europe, thereby increasing cargo premiums.