Heating Oil Prices Decline

US heating oil futures fell to around $4.85 per gallon on Thursday, paring recent gains alongside crude prices as investors assessed a US proposal to ease sanctions on shadow fleet tankers to reduce shipping costs and facilitate oil flows. The discussions follow President Donald Trump's temporary easing of sanctions on Russian diesel exports last week, although analysts have questioned the deal's potential to lower fuel prices given the relatively small volume involved. Meanwhile, Russia accused Ukraine of attacking two oil refineries, including the 400,000-barrel-per-day Ryazan facility, raising doubts over the prospects for an energy truce announced by Trump. Continued attacks on shipping near the Strait of Hormuz also pose risks to global oil flows. Separately, API data showed that US distillate inventories fell by 1.5 million barrels in the week ended October 9, pointing to tighter supplies.

Heating oil futures in the US held above $4.90 per gallon, the highest in three weeks and close to last month's record high of $5.30, as unprecedented supply tightness returned to the market's forefront. Russia and Ukraine exchanged strikes against each other's power and gas facilities. The strikes erased already-dim expectations that the energy ceasefire touted by President Trump would hold, stoking fears of continued attacks on major Russian refineries. The developments also deepened doubts that Russia would release 36 million barrels of diesel for export, a pledge that faced skepticism upon announcement, as a domestic distillate shortage prompted the Moscow to halt exports last quarter. Meanwhile, attacks on vessels crossing the Persian Gulf kept tanker shipping costs near record highs and curtailed exports from the region. Shortages of crude oil for major refineries had already driven prices to a record high and prompted US officials to briefly consider an export ban.

US heating oil prices fell to around $4.68 per gallon for a third consecutive session, weighed by prospects for increased Russian fuel supplies. President Donald Trump said Russia had agreed to supply diesel to US and global markets to help lower fuel prices, while his administration temporarily eased US sanctions on Russian fuel. Markets also assessed prospects for an energy ceasefire between Russia and Ukraine following Trump’s announcement of an immediate truce, although Ukrainian President Volodymyr Zelenskiy said Russia continued striking Ukrainian energy infrastructure. IEA Executive Director Fatih Birol urged governments to accelerate planned diesel releases and consider additional supplies. However, escalating conflict in the Middle East and tanker attacks near the Strait of Hormuz threatened the recovery in regional shipments. Separately, Gulf of Mexico producers worked to restore offshore output after Hurricane Isaias.