US Heating Oil Futures Rise to 3-Week High

Heating oil futures in the US rose above $4.0 per gallon, hitting their highest level in two months, as escalating tensions in the Middle East deepened concerns over global supplies of refined fuels. The collapse of the US-Iran truce and renewed tanker attacks in the Strait of Hormuz raised fears of disruptions to fuel shipments from the Persian Gulf, while Ukrainian strikes on Russia's largest refineries continued to curb diesel exports. Seasonal refinery maintenance and years of refinery closures in the US and Europe further tightened the supply outlook. The tightening supply backdrop lifted US refining margins to record highs, with the diesel crack spread climbing above $91 per barrel. Despite a 4.6 million-barrel increase in distillate fuel inventories in the week ending July 10, EIA data showed stockpiles remained well below their five-year seasonal average.

Heating oil futures in the US were at $3.97 per gallon, easing from the two-month high of $4.02 on July 14th as stronger inventory data momentarily offset a tightening supply backdrop. Data from the EIA indicated that distillate fuel stocks rose by 4.6 million barrels on the week ending July 19th, nearly erasing the draw from the earlier week. The build weighed against a decreasing SPR as more strikes between the US and Iran continued to hamper global supply of crude oil and refined fuels. On top of that, major diesel producer Russia halted exports of the fuel and shifted to an importer, as higher crude prices exacerbated the series of Ukrainian strikes on the country's largest refineries. This magnified the impact of refinery bottlenecks in the US and direct damage for facilities in the Middle East. Consequently, diesel crack spreads rose to a record high in July.

US heating oil prices held around $4.0 per gallon, near the highest level since May 21, driven by intensifying concerns over fuel supplies. US forces launched fresh strikes on Iranian targets and resumed a naval blockade of Iranian shipping through the Strait of Hormuz. President Donald Trump warned of further attacks unless Tehran returns to negotiations but also backed away from a proposed 20% charge on shipments through the strait. Adding to supply concerns, disruptions to Russian energy infrastructure following continued Ukrainian strikes prompted Russia to consider suspending diesel exports, as refinery outages and higher crude costs weighed on domestic fuel availability. Meanwhile, Kazakhstan’s Caspian Pipeline Consortium cut June shipments by 7% due to maintenance at the Tengiz oilfield and weaker Russian flows. At the same time, warmer-than-normal temperatures expected through July 28 are likely to sustain elevated fuel demand from the power sector.