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Heating oil Prices Continue to Rise

David Becker
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Heating oil prices are leading the rally in the petroleum complex and are poised to test resistance near the August 2013 highs after breaking out on Valentine’s Day. Strong demand for heating fuels given the recent frigid cold snap has generated strong demand for NYMEX heat. Additionally, the breakout in natural gas prices has made switching to distillates more economical, which has buoyed heating oil prices. The heat crack, which is the spread between heating oil and crude oil, remains strong at the top end of the 3-month range.

Energy traders are awaiting fresh data on inventories which have been delayed by the Presidents Day holiday. On Wednesday evening traders will see the release from the American Petroleum Institute, while the Department of Energy will release its inventory report on Thursday.

Hedge fund traders added to long position in heating oil according to the latest commitment of traders report released for the date February 11, 2014. According to the CFTC report, managed money increased long position by 1600 contracts while reducing short position by 600 contracts. Longs outweigh shorts 46K to 17K. The change was much more significant for crude oil positions. WTI hedge fund traders increased long position by nearly 18K contracts in the latest week while reducing short positions by 12K contracts.

Heating oil prices broke out on Friday of last week and continue to rise poised to test the August highs near 3.15. Support is seen near the breakout level at 3.065 and then again at the 10-day moving average near 3.04.

Momentum on the March heating oil contract is strong as the MACD (moving average convergence divergence index) is printing in positive territory after generating a buy signal in early February. The RSI (relative strength index) is moving higher with price action reflecting accelerating momentum while printing near 65 which is on the upper end of the neutral range.

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