FX.co ★ Heating Oil Drops After EIA

US heating oil futures fell below $2.39 per gallon, reversing an earlier rally as prices followed the decline in weaker crude oil feedstocks and the market absorbed the latest data from the EIA. A larger-than-expected increase in US crude inventories, coupled with a reported rise in distillate stocks, weakened the short-term supply narrative. Additionally, softer crude prices reduced cost support for refined products, capping their potential rise. Nevertheless, heating oil continues to be supported by increasing seasonal demand, as forecasts of an intense Arctic blast are boosting winter heating needs and increasing the likelihood of switching from natural gas to heating oil where infrastructure permits. Simultaneously, reduced refinery operations and lower distillate production have tightened the seasonal buffer, heightening sensitivity to supply disruptions. This includes the force majeure at Kazakhstan’s Tengiz field, which has removed export cargoes from the market and limited the downside despite the downturn.