FX.co ★ Heating Oil Tracks Crude's Plunge

U.S. heating oil futures have declined to below $2.60 per gallon, pulling back from highs seen in April 2024. This downward trend follows an increase in inventory that has weakened support from crude feedstock costs, despite continued tightness in distillate supplies. According to the American Petroleum Institute (API), U.S. crude stockpiles rose by 4.4 million barrels last week, marking the third consecutive weekly increase. Vortexa data further indicates an increase in crude oil on tankers, nearing 1.4 billion barrels. This suggests an abundance of floating or in-transit supply that may ease regional supply constraints. The International Energy Agency (IEA) is predicting a potential global surplus next year, exerting further pressure on forward pricing. Concurrently, U.S. distillate inventories are significantly below average seasonal levels. Additionally, the impending sanctions on Rosneft and Lukoil are complicating trade flows and causing caution among some buyers. However, recent colder weather forecasts for late November and early December have reinvigorated heating demand, prompting purchases. As a result, the market is currently balancing softer crude oil fundamentals against genuine product scarcity, with upcoming weather conditions likely to determine the market's next move.