Heating Oil Surges 10%

US heating oil futures surged 10% to above $2.86 per gallon, the highest in two years after unprecedented joint US and Israeli strikes on Iran that killed supreme leader Ayatollah Ali Khamenei threatened to disrupt energy supplies. Shipping companies quickly began rerouting vessels away from the Strait of Hormuz after insurers warned they might cancel coverage or sharply increase premiums. The narrow waterway is a vital chokepoint that handles roughly one-fifth of global oil shipments and significant volumes of natural gas. Meanwhile, OPEC+ agreed on Sunday to resume output hikes after first quarter pause. The planned increase of 206,000 barrels per day in April exceeded analyst expectations but represents only less than 0.2% of global demand.

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.