US Heating Oil Declines

US heating oil prices fell over 3% to below $3.20 per gallon, tracking the resumption of the decline in crude oil prices as the continued flow of vessels through the Strait of Hormuz outweighed renewed security concerns. More previously stranded oil tankers resumed transiting the Strait of Hormuz despite an incident in which an unidentified projectile struck a container ship near Oman, reigniting concerns over Iran's influence on traffic as Tehran and Washington negotiated a permanent end to the conflict. Meanwhile, Saudi Arabia resumed crude exports from the Ras Tanura terminal for the first time since March, while Qatar issued its first post-conflict crude tender. The White House also waived the Jones Act and tapped the SPR to help contain energy costs. However, the market remains tight because the US operates as a global supplier of last resort, pushing domestic diesel inventories to seasonal lows. Prospective Russian export bans could spark further upward pressure.

US heating oil prices held above $3.20 per gallon after mirroring a rebound in crude driven by renewed safety concerns in the Middle East. The maritime group UKMTO reported that a vessel was struck by an unknown projectile in the Strait of Hormuz off the Omani coast, prompting several commercial ships to reverse course. This incident stoked anxieties regarding Iran's control over the chokepoint as Tehran and Washington negotiate a permanent end to their war. Despite these disruptions, Saudi Arabian tankers proceeded toward the Ras Tanura terminal to resume Persian Gulf exports for the first time since March, and Qatar issued its first post-war crude tender. To contain energy costs, the White House waived the Jones Act and tapped the Strategic Petroleum Reserve. However, the market remains tight because the US operates as a global supplier of last resort, pushing domestic diesel inventories to seasonal lows. Prospective Russian export bans could spark further upward pressure.

Heating oil futures for delivery in the New York Harbor fell below $3.15 per gallon in late June, hovering near their lowest level since early March, on evidence that oil exports from the Middle East are gradually returning. Satellite data showed that loaded tankers are crossing the Strait of Hormuz as the memorandum of understanding and improved talks between the US and Iran drove both countries to lift their blockade. On top of that, the US remained on track to lift sanction on Iran to unlock fresh sources of energy supply from Western refiners and dollar buyers. Unlike crude oil prices, heating oil futures remained above pre-Iran war levels from late February. Distilling capacity in refiners was hit the hardest from depleted feedstock inventories in Europe and Asia, exemplified by shortages of jet fuel. On top of that, denser crude oil grades from the Persian Gulf, which commonly yield more diesel, were still not at full capacity due to attacks on local refineries.