FX.co ★ Heating Oil Rebounds After EIA Data

U.S. heating oil futures have fallen below $2.40 per gallon following a recent drop attributed to concerns over an excess oil supply in the market. However, the latest data from the Energy Information Administration (EIA) indicates a tightening scenario for distillates. For the week ending October 24th, U.S. distillate inventories declined by 3.36 million barrels, exceeding expectations significantly and marking the fourth consecutive weekly decrease. During the same period, crude stocks decreased by 6.86 million barrels, against a projected 0.2 million barrel drop, hence, limiting the availability of refinery feedstock and enhancing refining margins. The situation is further aggravated by new U.S. sanctions against Rosneft and Lukoil, alongside refinery shutdowns and attacks on energy infrastructure, which have reduced the volume of oil available for export. This has tightened the diesel and gasoil market, pushing European gasoil prices to their highest levels in over 20 months. Additionally, a backwardated forward curve and increasing seasonal heating demand have elevated front-month physical premiums. As a result, despite the recent decline, near-term distillate prices remain susceptible to upward movement.