FX.co ★ Heating Oil Drops to 6-Week Low After EIA

US heating oil futures have dipped below $2.30 per gallon, reaching six-week lows. This decline is primarily driven by new stock increases within the distillate sector, indicating that the anticipated winter shortage may be significantly less severe than initially feared, despite the upward pressure exerted by higher crude oil feedstock costs. According to the most recent Energy Information Administration (EIA) report, distillate inventories increased by 2.06 million barrels in the week ending November 28th, surpassing expectations of a 0.7 million barrel build. This follows a 1.15 million barrel rise the previous week, marking the third consecutive weekly inventory build. These inventory increases have weakened the argument for a drastic seasonal deficit, although the rise in crude costs has tempered the decline in heating oil prices. This is due in part to ongoing strikes affecting Russian tankers and refineries, and the lack of resolution over the Russia-Ukraine conflict, which continues to maintain a significant supply risk premium. Additionally, increasing geopolitical tensions involving Venezuela continue to pose an upside risk to seaborne crude and fuel supplies.