uploads/2015/11/U.S.-Resedential-Heating-Oil-Prices-2015-11-201.jpg

Will Greater Distillate Demand Favor Heating Oil Prices?

By

Updated

Heating oil prices

In its Weekly Petroleum Status Report released on November 18, 2015, the EIA[1. U.S. Energy Information Administration] stated that heating oil prices were at $2.39 per gallon for the week ended November 13, 2015. Heating oil prices fell by $0.03 per gallon compared to prices for the week ending November 6. Prices in the week ended November 13, 2015, were $0.98 per gallon less than they were in the corresponding period last year, a fall of 29.1%.

East Coast residential heating oil prices fell by $0.01 per gallon, settling at $2.39 per gallon on November 9, 2015. Midwest heating oil prices also fell by $0.09 per gallon, settling at $2.15 per gallon on November 9, 2015.

Article continues below advertisement

Analysis

Heating oil prices were almost 30% lesser than they were a year ago, On the other hand, distillate demand—including heating oil and diesel demand—was 9.6% more than the corresponding period last year. This indicates that distillate production and stocks are more than required.

Because of prolonged positive trends in the crack spread and long-term lower crude oil prices (USO), refiners were forced to pump more refined products into the market, leading to lower prices for refined products. Distillate demand rose by 0.34 MMbpd (million barrels per day) for the week ended November 13, and heating oil prices rose last week as well.

For more updates on Distillate stocks, Refer to the Energy Section on Market Realist.

What is the impact?

A rise in heating oil prices is bullish for refineries. This has a positive impact on revenues of refiners such as Chevron (CVX), HollyFrontier (HFC), Valero Energy (VLO), Tesoro (TSO), Western Refining (WNR), and Marathon Petroleum (MPC).

Some of these companies are components of ETFs like the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), the iShares US Energy ETF (IYE), the Energy Select Sector SPDR ETF (XLE), and the iShares US Oil & Gas Exploration & Production (IEO).

Advertisement

More From Market Realist