Heating oil continues to shine as demand surges

The Widow Maker Continues To Scream!

While the global markets fret about another subpar Italian auction and turmoil in Europe, the energy complex is worrying about global tightness in distillate supply. The heating oil versus gasoline spread continues to scream so refiners know where to put their focus. Demand is screaming, surging in Japan, China, South America and the spread has put in its best performance in years. Not only is heating oil trading at a premium to heat oil, something that would have been almost unthinkable just a few years ago, but it has picked up a dime on the spread.

US supply of distillate, when compared to demand, is at a four-year low. Dow Jones reports, "Surging demand for heating oil and diesel fuel, at a time of slumping gasoline consumption, has pushed the price difference between the fuels to its highest level since January 2009. December delivery settled Friday at nearly 57 cents a gallon, or about 18%, higher than the price of RBOB gasoline futures. Early Monday, the gap widened to near $0.65. EIA says US diesel/heating oil demand was at 3-1/2 year high in latest 4 weeks, while gasoline use is at a 12-year low for this time of year." US Exports of diesel are near an all-time high.

Reuters News reported that, "Gasoil refining margins in Europe pushed higher on Monday, up to levels not reached since January 2009, as tight supply continued to bite and traders eyed the expected seasonal demand from Germany with the weather about to turn colder. The ICE gasoil crack was trading at around $21.58 a barrel at 1655 GMT, its highest level since January 2009, up from Friday's $19.74 a barrel."

We have been telling you about the potential for this spread for some time!

Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at pflynn@pfgbest.com.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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