Heating Oil Decline From June-2022 Highs

US heating oil climbed over 4% to above $4.00 per gallon in late April, extending last week’s 14% gain and hovering near a two-week high, as prolonged Middle East supply disruptions tightened availability for refiners. Although a ceasefire has largely been held since early April, efforts to revive peace talks in the Iran conflict remain uncertain. A US-led blockade remains in place, limiting Iranian maritime activity, while Iran has responded with its own restrictions in the Strait of Hormuz, with reports last week also pointing to gunfire involving commercial vessels. Consequently, vessel movements through the route have dropped to almost zero, disrupting a vital corridor that typically carries around 20 million barrels per day of oil and refined products. Markets note that a sustained closure of the major passageway would force oil demand lower to align with supply already down by at least 10%.

US heating oil futures rose to above $4.0 per barrel in April, gaining more than 18% this week and reaching a two-week high amid tightening supply conditions for refiners, driven by the prolonged Middle East war. The US and Iran remained in a standoff over the Strait of Hormuz after failing to resume peace talks, with Washington maintaining a naval blockade on vessels traveling to and from Iranian ports. Since the blockade began, US forces have intercepted and boarded ships while turning back dozens attempting to enter Iranian waters. Iran has also restricted passage through the strait, with reports of gunfire involving commercial vessels this week. The escalating tensions have reduced oil flows from major Persian Gulf producers, as the chokepoint accounts for roughly a quarter of global seaborne oil trade. Meanwhile, EIA data showed that distillate stocks, including diesel and heating oil, fell by 3.4 million barrels last week, exceeding expectations for a 2.5 million-barrel draw.

Heating oil futures rose above $3.80 per barrel on Wednesday, extending a two-day advance, as US–Iran peace talks faltered and President Trump maintained a blockade of the Strait of Hormuz despite extending a ceasefire with Iran. Trump said the truce would continue until Iran submits a “unified proposal” to end the war with the US and Israel. The move followed reports that Vice President JD Vance’s Pakistan trip for Iran talks was postponed, while Tehran, via a Pakistani intermediary, told US counterparts it would not join further talks. Since the conflict with Iran began in late February, crude and refined product flows from the Persian Gulf have fallen by about 13 million bpd, according to IEA. Meanwhile, API data showed distillate stockpiles, which include diesel and heating oil, decreased by 3.40 million barrels last week. Elsewhere, warmer-than-normal temperatures through April 30 could also weigh on heating and cooling demand.