US Heating Oil Soars by Over 7%

US heating oil prices surged more than 7% to around $4.19 per gallon after Iran-backed Houthi militants claimed an attack on Saudi Arabia’s Jazan refinery near the Red Sea. Saudi authorities said the resulting fire was extinguished early Sunday, without providing further details. The incident added to pressure on an already tight global diesel market, as disruptions to shipping through the Strait of Hormuz compounded the impact of Russia’s fuel export restrictions. Refinery capacity is also under strain as fuel demand continues to outpace supply, with US refiners processing crude at the highest seasonal rate since 2018 despite capacity having fallen by nearly 600,000 barrels per day over the same period. Meanwhile, Iran and Oman have yet to finalize a deal to reopen Hormuz. Iran said the agreement was “very close,” but insisted that the US must lift its blockade and provide compensation before reopening the waterway.

US heating oil futures rose to around $3.96 per gallon on Monday, gaining for a fourth consecutive session, driven by uncertainty over the reopening of the Strait of Hormuz. Iran said a deal with Oman to establish new shipping lanes was nearing completion but stressed that the waterway would only reopen if Washington met additional conditions. Tehran also said it was not engaged in direct negotiations with the US and would not initiate talks while Washington continues to breach an interim deal signed in June, despite US claims that an agreement is near. Supply concerns were further heightened after Iran-aligned Houthis said they attacked Saudi Aramco’s Jazan refinery. Meanwhile, Russia and Ukraine have stepped up attacks on each other, raising the risk of further strikes on energy facilities after Ukraine recently carried out a long-range drone attack on a major Russian oil refinery. Against this backdrop, Moscow extended its gasoline and diesel export ban through January 2027.

US heating oil futures rose above $3.90 per gallon on Friday, rebounding from an over three-week low, as renewed tensions in the Strait of Hormuz cast fresh doubt on efforts to fully reopen the vital shipping route. Iranian state media also reported that parliament is reviewing a proposal to bar ships linked to the US, Israel, and other countries deemed hostile by Tehran from transiting the Strait of Hormuz under the Oman-brokered shipping agreement until Iran receives compensation for war-related damages. Adding to supply concerns, Ukraine carried out long-range drone attacks on two Russian oil refineries, including one of the country's largest. Russia's gasoline and diesel exports plunged 60% in July, prompting Moscow to extend its gasoline export ban through January 2027. Meanwhile, EIA data showed distillate fuel inventories, including diesel and heating oil, fell by 3.473 million barrels in the week ended July 31.