Heating Oil Failed to Hold to Near 2-Year High

US heating oil futures dropped toward $2.60 per gallon on Friday, retreating from April 2024 highs as a record domestic inventory build finally overwhelmed geopolitical risk premiums. This decline accelerated after the EIA reported a staggering 15.99 million barrel surge in US crude stocks, the largest build in three years. While intensified Middle East tensions and a late season winter storm in the Northeast initially supported prices, the sheer volume of oversupply eventually broke the market floor. Even with ongoing nuclear talks in Geneva and a resilient 4% rise in four week fuel demand, the weight of massive stockpiles forced prices lower. Investors are now shifting focus to the upcoming OPEC+ meeting, where a failure to delay production hikes could push futures even further into the red. Despite the volatility, the market currently favors the bearish supply data over the threats to global flows through the Strait of Hormuz.

US heating oil futures climbed back above $2.70 per gallon, recovering from a brief dip to trade at April 2024 highs as intensified Middle East tensions and rebounding crude oil feedstock costs outweighed a record domestic inventory build. This rally occurred as investors shrugged off the EIA's staggering 15.99 million barrel surge in US crude stocks to focus on the high-stakes third round of nuclear talks in Geneva. While negotiators signaled some flexibility, a defiant statement from Iranian state media regarding uranium exports reignited fears of a breakdown that could threaten flows through the Strait of Hormuz. Demand for the fuel was further bolstered by a late-season winter storm in the US Northeast, which temporarily reversed the bearish impact of unseasonably warm forecasts in the West. Supply side pressures were reinforced by reports that OPEC+ may delay its planned April production hike if geopolitical risks persist, keeping the global balance tight.

US heating oil futures eased to around $2.64 per gallon from recent three-month highs seen on February 24 as massive inventory builds outweighed geopolitical risk premiums. The latest EIA data revealed a staggering 15.99 million barrel surge in US crude oil stocks for the week ending February 20, the largest build in three years. Simultaneously, distillate inventories shifted from a sharp draw to a 252 thousand barrel increase. Combined with forecasts for above-average temperatures across the Western US, the outlook for heating demand remains weak as the winter season nears its end. While tensions persist following President Trump’s accusations regarding Iran’s nuclear program, the sheer volume of domestic stockpiles has provided a significant buffer against potential supply disruptions in the Strait of Hormuz.