FX.co ★ Heating Oil Tracks Crude Lower

U.S. heating oil futures have dipped below $2.05 per gallon, nearing the lowest levels observed since August 2021, when prices hovered around $2 on April 8th. This decline mirrors the reduction in crude oil feedstock costs, amid mounting concerns over decreased energy demand. Heightened trade tensions are adding to the pressure, especially following President Trump's recent tariff increase on Chinese imports to 125%—a substantial spike just a day after a previous 104% increase. A 90-day tariff suspension for most other countries has offered only brief respite. This stringent trade policy, coupled with China's imposition of an 84% retaliatory tariff on U.S. goods and the expectation of further countermeasures, has fueled fears of reduced demand from the world's largest oil importer. Additionally, OPEC+ has indicated intentions to expedite production increases, intensifying fears of potential oversupply. Simultaneously, recent data from the EIA demonstrated a 3.54-million-barrel reduction in U.S. distillate inventories as of April 4th.