Key Highlights

  • Heating oil traded near US$4.80 per gallon during today's session, up 1.57%.
  • Prices rose past US$5.00 on September 24 before sliding below US$4.70.
  • The IEA chief urged governments to speed up planned diesel releases.
  • Valero reports third-quarter results on October 22 and Marathon Petroleum on November 3.

Heating Oil Rises Near US$4.80 a Gallon

US heating oil futures, the NY Harbor ultra-low-sulfur diesel contract, traded near US$4.80 per gallon during today's session, up US$0.07, or 1.57%, according to market data. They are up 4.95% on the week but down 3.34% on the month, and 126.05% higher year to date.

A Ceasefire Claim, Not a Confirmed Deal

Recent weakness had been linked to a claim by President Trump of an immediate energy ceasefire between Russia and Ukraine. Ukraine's president was awaiting details and Russia had not commented, while Ukraine reported continued Russian strikes on energy infrastructure. The market was reacting to the prospect of easier supply, not to a confirmed change in physical flows.

Diesel and heating oil are linked to Russia because it has been a large exporter of diesel-type fuels, so a durable easing of attacks on refineries and ports could ease supply worries. A truce announced in a headline can also be reversed within days, which is one reason daily moves can look larger than the underlying physical shift.

Supply Risks That Remain

Tanker attacks near the Strait of Hormuz and strikes on Saudi infrastructure remain risks to energy flows, and Gulf of Mexico producers were restoring offshore output after Hurricane Isaias. The International Energy Agency's chief, Fatih Birol, urged governments to speed up planned diesel releases, which points to distillate stocks being a policy concern.

Earlier this autumn, heating oil rose past US$5.00 per gallon on September 24 before sliding below US$4.70 amid uncertainty over US diesel export restrictions. That swing of more than 30 cents within three weeks shows how much headlines on the Middle East, Russia and storms have moved the contract.

Refiners and Fuel Sellers

Refiners earn a margin between crude oil and the products they sell, so the ULSD price matters most when set against crude costs. Valero Energy (NYSE:VLO) operates 14 refineries and has scheduled third-quarter results for October 22. Marathon Petroleum (NYSE:MPC) reported second-quarter net income of US$5.1 billion and a refining and marketing margin of US$36.33 per barrel, with distillate yields of 1,131 thousand barrels per day, and reports on November 3.

Shell (LSE:SHEL) is integrated and will publish third-quarter results on October 29 at 07:00 GMT. Ampol (ASX:ALD) owns the Lytton refinery in Queensland and fuel marketing assets, with a first-half Lytton refiner margin of US$28.26 per barrel and a 185 cents per share interim dividend. Imperial Oil (TSX:IMO) is a Canadian integrated company with refining and fuel marketing operations.

Winter Weather Risk and the Path Toward US$5 Heating Oil

Factors that could support prices include renewed attacks on energy infrastructure, further disruption near Hormuz, another Gulf of Mexico storm or tighter US diesel export policy. Factors that could weigh include a confirmed Russia-Ukraine energy truce, faster government diesel stock releases and weaker demand if inflation and interest-rate worries slow activity.

The November ULSD contract approaches expiry at the end of October, so continuous charts will roll to December. In short, heating oil is trading on headlines more than data, and refiners' results depend on crude costs, throughput and hedging as much as on the diesel price.