Heating Oil Rises on Northeast Cold Spell, Pulling Crude Oil Higher
New York, Feb. 23 (Bloomberg) -- Heating oil rose 3 percent,
lifting crude oil, as the coldest weather yet this winter spurred
consumption in the Northeast, the biggest U.S. residential
heating fuel market.
Temperatures plunged close to zero degrees Fahrenheit in
some areas as a cold front lingered for the past three days. The
cold increased expectations for a drop in inventories that are
21 percent higher than a year ago.
''There was some cooler weather today and the market was
perceptive to it,'' said John Saucer, an analyst at Salomon Smith
Barney in Houston. ''But at this stage in the winter, things
aren't going to change much with one week of cold.''
Heating oil for March delivery rose 0.97 cent, or 3.1
percent, to 31.84 cents a gallon on the New York Mercantile
Exchange. April crude oil rose 41 cents, or 3.4 percent, to
$12.48 a barrel on the Nymex. In London, Brent crude rose
36 cents, or 3.4 percent, to $10.94 a barrel on the International
Petroleum Exchange.
The below-normal cold is not expected to last beyond
Wednesday, according to the National Weather Service.
Saucer said that today's price gains were partly due to
weather, and partly due to traders buying oil contract based on
the favorable analysis of price charts.
The Nymex April crude oil contract, for instance, set a
contract low of $11.35 a barrel on Dec. 21 and failed to go below
that level last week when it fell as low as $11.37. Such a
pattern, known as a 'double-bottom' can often signal that prices
are poised to rise, Saucer said.
Greenspan on Oil
Federal Reserve Chairman Alan Greenspan mentioned oil prices
today when he told the Senate Banking Committee that the U.S.
economy continues to expand at a ''surprisingly robust'' pace
with no evidence of a rapid acceleration in inflation.
''We see very little in the pipelines of the inflation
process which suggests that there is an imminent acceleration''
in inflation, Greenspan said. ''The reason we have a modest
uptick is that it's hard to envisage the price of oil and a
number of other one-shot declines continuing at the rate that
they did last year.''
Analysts said that given that oil prices have fallen heavily
already, dropping 32 percent in 1997 and the same percentage in
1998, a recovery from those lows wouldn't be too surprising.
''It's a sensible comment to make, but it's not earth-
shattering,'' said Saucer.
Gasoline Steady
March gasoline ended little changed at 34.84 a gallon, up
0.14 cent the Nymex, after rising as high as 35.75 cents. There
was renewed speculation that a large East Coast refinery run by
Tosco Corp. will slow production.
The March heating oil and gasoline contracts will expire on
Friday.
Crude prices rose last Friday on reports that Tosco was
cutting gasoline production at its Bayway refinery in Linden, New
Jersey, and its Trainer refinery in Pennsylvania. Prices fell the
same day after Tosco denied the reports, though gasoline rose
again today amid renewed speculation about possible Tosco
closures, or early maintenance work. Tosco declined to comment.
''It makes sense that they'd do (the maintenance) right now
because (profit) margins are so bad,'' said Tom Blakeslee, a
trader at Eildon Marketing LLC in White Marsh, Maryland. ''I'd
also expect that as soon as the economics improve, they'll start
it right back up again.''
The two refineries together account for about 2 percent of
U.S. refining capacity, and are key suppliers to the Northeast
market, at a time when marketers are beginning to anticipate the
peak summer driving season.
Gasoline supplies, like those for heating oil, are well
above year-earlier levels. The American Petroleum Institute said
last week that gasoline supplies were close to a 5-year high and
12 million barrels higher than levels a year ago.
The API will release its latest weekly inventory and
production report later today. Eight analysts surveyed by
Bloomberg expect an increase in crude oil supplies of between
1.1 million barrels and 2.1 million barrels, and a decrease in
distillate supplies, which include heating oil, of between
1.3 million barrels and 2.1 million barrels.
Gasoline inventories were probably little changed last week,
amid mixed projections from analysts for a 200,000-barrel drop to
a 700,000-barrel rise, on average.
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