NEW YORK - Cold Northeastern weather remains supportive of New York Harbor heating oil but distillates in general are under a pall near-term with ample supply coming from the Gulf Coast and across the pond, traders said Monday.
"There's plenty of supply ... The pipe has plenty," said a Harbor trader referring to oil product shipments from the Gulf Coast when asked why price differentials were lower on Monday.
Adding to the ample pipeline shipments from refinery row, about half a dozen cargoes of Russian gas oil are bound to the U.S. East Coast, due to arrive between the middle of next month and early January, traders say. [ID:nN21492207]
On Monday, Harbor distillates differentials were lower against a higher December futures benchmark. Heating oil was offered evens to 0.35 cent under the benchmark December print, down a quarter cent from Friday, after having moved to a slight premium to futures last week for the first time this fall.
U.S. heating demand this week is expected not to deviate from normal levels, the National Weather Service forecast in its weekly report on Monday, after heating demand was almost 25 percent above normal nationwide last week.
Demand for heating oil -- the favored heating fuel of the Northeast region -- is expected to be about 10 percent above normal this week, according to the report. [nN24512620]
In the Northeast, temperatures will average near to below normal through Friday, before returning to near to above normal Saturday, according to forecaster Meteorlogix. [ID:nDTN044]
Asked about heating demand, a trader said: "It's holding," adding that should put a floor under differentials.
But some market watchers point out some bearish developments in the heating oil complex especially after spot NYMEX heating oil closed last week below $1.70 a gallon for the first time since March 2007.
"In spite of an extended blast of much below-normal temperatures over the largest residential heating oil market in the U.S., the benchmark NYMEX contract closed lower in four out of five sessions last week," noted Stephen Schork, editor of the Schork Report.
"Bottom line, despite a frigid start to the heating season, we have yet to see a knock-on to Btus (be they heating oil or natural gas)," he added in a report on Monday.
In other markets east of the Rockies, diesel and gasoline price differentials in the U.S. Midwest should remain weak near-term amid lower demand and ample supply, traders said, though some hubs may be reaching a bottom for now.
"It should stay under pressure although I don't know that Chicago unleaded (gasoline) can get a whole lot cheaper. It's down and dirty already," said one Midwestern trader.
Chicago gasoline was quoted at 13.75 to 14.75 cents under December print Monday, down from about 11 cents under Friday.
Schork sounded a cautious note on spot gasoline.
"At this point we all have to ask ourselves how much lower can spot gasoline go? Surely the market has to rebound right? Perhaps, but we are not willing to buy it," he noted.
Given poor gasoline margins and weak demand, "U.S. refiners are in no hurry to ramp up production," he said, adding the benchmark NYMEX spot gasoline crack has not traded positive in seven weeks.
Last Thursday the winter-spec December RBOB crack expired at minus $7.33 a barrel, he said, while the January RBOB contract has averaged $3.87 a barrel below WTI over the last five weeks.
"Yet, despite poor economics (and the attendant pullback in production), gasoline inventories continue to build," Schork added, noting that U.S. gasoline stocks surged by more than 19 million barrels according to the past eight weekly government oil data reports.
According to Reuters data, the Jan RBOB crack spread was at minus $4.82 on Monday while the heating oil crack crack was plus $21.91.
"There's plenty of supply ... The pipe has plenty," said a Harbor trader referring to oil product shipments from the Gulf Coast when asked why price differentials were lower on Monday.
Adding to the ample pipeline shipments from refinery row, about half a dozen cargoes of Russian gas oil are bound to the U.S. East Coast, due to arrive between the middle of next month and early January, traders say. [ID:nN21492207]
On Monday, Harbor distillates differentials were lower against a higher December futures benchmark. Heating oil was offered evens to 0.35 cent under the benchmark December print, down a quarter cent from Friday, after having moved to a slight premium to futures last week for the first time this fall.
U.S. heating demand this week is expected not to deviate from normal levels, the National Weather Service forecast in its weekly report on Monday, after heating demand was almost 25 percent above normal nationwide last week.
Demand for heating oil -- the favored heating fuel of the Northeast region -- is expected to be about 10 percent above normal this week, according to the report. [nN24512620]
In the Northeast, temperatures will average near to below normal through Friday, before returning to near to above normal Saturday, according to forecaster Meteorlogix. [ID:nDTN044]
Asked about heating demand, a trader said: "It's holding," adding that should put a floor under differentials.
But some market watchers point out some bearish developments in the heating oil complex especially after spot NYMEX heating oil closed last week below $1.70 a gallon for the first time since March 2007.
"In spite of an extended blast of much below-normal temperatures over the largest residential heating oil market in the U.S., the benchmark NYMEX contract closed lower in four out of five sessions last week," noted Stephen Schork, editor of the Schork Report.
"Bottom line, despite a frigid start to the heating season, we have yet to see a knock-on to Btus (be they heating oil or natural gas)," he added in a report on Monday.
In other markets east of the Rockies, diesel and gasoline price differentials in the U.S. Midwest should remain weak near-term amid lower demand and ample supply, traders said, though some hubs may be reaching a bottom for now.
"It should stay under pressure although I don't know that Chicago unleaded (gasoline) can get a whole lot cheaper. It's down and dirty already," said one Midwestern trader.
Chicago gasoline was quoted at 13.75 to 14.75 cents under December print Monday, down from about 11 cents under Friday.
Schork sounded a cautious note on spot gasoline.
"At this point we all have to ask ourselves how much lower can spot gasoline go? Surely the market has to rebound right? Perhaps, but we are not willing to buy it," he noted.
Given poor gasoline margins and weak demand, "U.S. refiners are in no hurry to ramp up production," he said, adding the benchmark NYMEX spot gasoline crack has not traded positive in seven weeks.
Last Thursday the winter-spec December RBOB crack expired at minus $7.33 a barrel, he said, while the January RBOB contract has averaged $3.87 a barrel below WTI over the last five weeks.
"Yet, despite poor economics (and the attendant pullback in production), gasoline inventories continue to build," Schork added, noting that U.S. gasoline stocks surged by more than 19 million barrels according to the past eight weekly government oil data reports.
According to Reuters data, the Jan RBOB crack spread was at minus $4.82 on Monday while the heating oil crack
