FX.co ★ Heating Oil Eases after Distillate Build

Heating oil futures in the US fell below $2.60 per gallon, retreating from the peaks seen in April 2024. This decline occurred as the historically tight distillate market experienced some relief, coinciding with a drop in crude feedstock costs due to renewed diplomatic efforts on the geopolitical front. For the week ending November 14, distillate inventories unexpectedly increased by 171 thousand barrels, breaking a six-week pattern of significant inventory draws. This surprise build alleviated immediate supply tightness and reduced upward pressure on heating oil prices in the near term. Simultaneously, crude prices saw a decrease following remarks from a Ukrainian official indicating that Kyiv had received signals regarding US-led proposals to conclude the conflict between Russia and Ukraine. These developments fueled hopes for refreshed diplomatic endeavors and reduced the geopolitical risk premium. Additionally, Russia's acknowledgment that sanctions on Rosneft and Lukoil had not affected production further influenced bearish sentiment in the crude market fundamentals.