Heating Oil Extends Gains

Heating oil futures extended their advance toward $4 per gallon on Friday, as markets remained focused on assessing the durability of the fragile ceasefire ahead of this weekend’s US-Iran talks. Israeli strikes on Lebanon led Iran to shut the Strait of Hormuz once more, heightening diplomatic tensions. Prime Minister Benjamin Netanyahu said operations in Lebanon are not covered under the US-Iran truce, while Washington has arranged talks next week with Israel and Lebanon to push forward broader ceasefire negotiations. Adding to pressure on the truce, President Donald Trump warned Tehran against charging fees on vessels passing through the Strait and criticized Iran’s handling of energy flows as inadequate. Despite ongoing tensions, the ceasefire announcement earlier this week initially triggered a sharp selloff in energy markets, pushing heating oil to a weekly loss of more than 11%.

Heating oil futures rose more than 5% to around $4 per gallon on Thursday, recouping part of the previous session’s sharp losses, as Israeli strikes on Lebanon threatened hopes of sustaining a Middle East ceasefire. Iran blocked shipping in the Strait of Hormuz in protest, though the White House denies the waterway is closed. Iran's Parliament speaker said three key clauses of a 10-point proposal were violated ahead of negotiations scheduled for Friday in Pakistan, adding that in such a situation, a bilateral ceasefire or talks were unreasonable. The near-shutdown of traffic through the Strait, through which about one-fifth of oil flows, has caused the largest oil supply disruption in history. Analysts noted that even once transit resumes, the return of energy supplies won’t be instant.

Heating oil futures plummeted around 14% toward $3.80 per gallon on Wednesday as a diplomatic breakthrough between the United States and Iran significantly reduced the geopolitical risk premium. Prices retreated after President Trump delayed military strikes by two weeks in a conditional ceasefire that allowed for the temporary reopening of the Strait of Hormuz. This de-escalation offset a surprisingly bullish EIA report which showed that distillate stocks fell by over 3.1 million barrels, more than double the anticipated draw. At the same time, crude oil inventories rose by 3.08 million barrels against a predicted 0.7 million barrel build, heating oil specific stocks edged up by 233,000 barrels. Market participants also monitored reports of a drone strike on Saudi Arabia’s East West pipeline which serves as a critical alternative route to the Red Sea. Despite this localized disruption the broader plunge in energy benchmarks have eased global supply fears and inflationary pressures.