U.S. heating oil futures have continued their downward trajectory, reaching approximately $2.31 per gallon and marking a one-month low. This decline is fueled by new data that weakens the argument for a severe winter distillate shortage. Recently, U.S. distillate inventories increased by about 1.15 million barrels in the week leading up to November 21st. This follows a previous week's rise of 171 thousand barrels, after six consecutive weeks of inventory depletion that had sparked concerns about potential shortages.
Meanwhile, costs associated with crude feedstock remain under pressure. This is due in part to intense diplomatic efforts involving a U.S.-backed peace framework in Ukraine and ongoing U.S.-Russian interactions, which heighten the likelihood of easing wartime restrictions on Russian oil. Such a development would introduce additional crude and refined products into markets already facing oversupply.
On the demand side, support is minimal, with the National Oceanic and Atmospheric Administration (NOAA) forecasting certain pockets of below-normal temperatures across various parts of the U.S. into early December. However, this cold weather pattern is inconsistent across the nation and insufficient to counterbalance the supply-driven downturn.
