NEW YORK: Brent crude oil traded lower yesterday, but pared losses sharply following a rise in heating oil prices as cold weather in the US Northeast drove up demand.
Oil futures remained broadly pressured by worries over emerging markets, weak factory data from China and expectations for lower demand as US refiners shift into maintenance season.
A fresh round of snowfall fell on the US Northeast yesterday after several inches were dumped on the Ohio Valley a day earlier, driving demand for US distillates, which include heating oil, higher. “The heating oil found its way and led the way back up,” said Jeff Grossman, president of BRG Brokerage in New York.
Weakening equities and currencies in emerging market economies pressured global markets lower and weighed on oil prices. US stock indexes pulled oil lower after data showed the factory sector in the world’s largest economy expanded in January at its slowest pace in eight months.
Brent was trading down 9 cents at $106.31 a barrel by 1759 GMT, having sunk to a near 3-month low of $105.40 earlier in the session. US oil fell 79 cents to $96.70 a barrel.
US ultra-low sulfur diesel (ULSD), known more commonly as heating oil, was up 1.09 cents to $3.0080 a gallon. It had previously risen about 2 cents to a session high of $3.0185.
Brent’s premium to US crude oil contracted earlier in the session to $8.06, just above the low of $8.04 set on October 18, as some analysts and traders expect data to show a large draw in supplies at Cushing, Oklahoma - the delivery point for the US oil futures contract.
But weakening US oil prices widened the spread between the two benchmarks to more than $9 in early afternoon trading. Market players also turned their attention to refiners moving into maintenance that would curb demand for crude oil.
“I think the market is being turned on its head because we are going into peak refinery turnaround season,” said Stephen Schork, editor of the Schork Report in Villanova, Pennsylvania. “Demand is drying up for crude.”
US oil refiners are expected to take 800,000 barrels per day (b/d) of capacity offline in the week ending on February 7, down from 979,000 b/d the previous week, data from research company IIR showed.
Analysts said macroeconomic demand issues in China, the world’s second largest oil consumer, would continue to weigh on energy markets globally. The potential impact of international political tensions on oil supplies is expected to keep a floor under prices. The Libyan prime minister said yesterday that he ordered troops to move toward oil exporting ports in the east that have been under rebel control for months.
Reuters
