FX.co ★ Heating Oil Rises to 15-Week Highs

US heating oil futures rose to over $2.51 per gallon, reaching levels not seen since July, as the narrowing supply of distillates overshadowed the increase in crude oil stocks. In the week ending October 31st, US distillate inventories decreased by approximately 643,000 barrels, marking the fifth consecutive weekly decline and pushing them below typical seasonal levels. This reduction has diminished the reserve that refiners and distributors maintain in preparation for the winter months. Conversely, US crude oil inventories increased by approximately 5.2 million barrels during the same period. However, this rise has not resulted in a corresponding increase in middle distillates due to reduced refinery operations and lower distillate yields, alongside a recent decrease in net distillate production. The situation is exacerbated by strong export flows, which have redirected barrels overseas, preventing them from replenishing domestic supplies. With colder weather driving up demand for heating oil and diesel, the physical market and crack spreads have tightened, thus supporting short-term futures prices, even as the costs of crude feedstock decline.