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Heating Oil Tumbles as Hedge Funds Exit

David Becker
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www.iforex.com

Heating oil prices continued to trade under pressure on Wednesday, ahead of the Fed interest rate meeting, following inventory data released on Wednesday by the Department of Energy. Crude oil prices have faced significant headwinds as production in the US reaches decade level highs. Hedge fund traders liquidated long futures and options position in heating oil in the latest week according to the most recent industry report.

Heating oil prices continued to move lower on Wednesday following the most recent government estimate on inventories. According to the Energy Information Administration, U.S. commercial crude oil inventories increased by 5.9 million barrels from the previous week. Gasoline inventories decreased by 1.5 million barrels last week, while distillate fuel inventories decreased by 3.1 million barrels in the same period.

The report by the American Petroleum Institute showed a similar build in crude oil. The API late Tuesday reported a climb in crude supplies that was more than twice what the market expected. The API said crude inventories rose 5.9 million barrels for the week ended March 14, 2014. Analysts surveyed had forecast a climb of 2.6 million barrels. The API reported gasoline stockpiles fell 1.4 million barrels, while distillate supplies declined 674,000 barrels. Analysts were looking for gasoline stockpiles to decline by 1.6 million barrels and distillate supplies to fall by 900,000 barrels.

On the Demand front, Total product demand over the last four-week period averaged 18.6 million barrels per day, up by 1.4% from the same period last year. Over the last four weeks, gasoline demand averaged 8.6 million barrels per day, up by 1.5% from the same period last year. Distillate fuel demand averaged over 3.8 million barrels per day over the last four weeks, up by 5.1% from the same period last year.

Hedge fund traders liquidated long heating oil futures and options position according to the latest commitment of traders report released for the week ending March, 11 2014. According to the CFTC, managed money reduced long futures and options position by 10K contracts while increasing short futures and options position by 1K contracts.

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