Heating oil in New York harbor: not so hot

But that wasn’t all. In the cash market, prompt NY Harbor No.2 oil cash differentials slid 1.25 cent/gal, which is not an enormous move in one day, but one you don’t normally see when the outright price plummets as it has. A sharp rise or fall in outright price benchmarks on NYMEx often slows the shift in the differential. (The front-month NYMEX heating oil contract by 11:30 a.m. Monday had fallen 10 cts, to about $1.627, as the combination of a stronger dollar and lower equities helped weigh on refined product markets. )

What this slide in the differential means is that the NY harbor No. 2 oil market is yet another one where the contango is growing, a sign that inventories are piling up. Cash market trade in the NY harbor is for barges loading 3-7 days out. So if the spread for the barge price against the January No. 2 oil contract on the NYMEX declines, it means that the slope of the forward curve increases, a shift that is generally seen as a sign that stocks are building.

Sources said that buying demand in the cash market was extremely limited as temperatures in parts of the US East Coast approached near 60 degrees Fahrenheit. Temperatures were expected to remain seasonally high most of the week before a cold front moves in Friday.

In addition, the US East Coast market was bracing for the arrival of several cargoes of gasoil from Russia. A rare movement of cargoes of Russian gasoil from the Black Sea to the US was reported by Platts last week.

But traders who have been in the market before caution that with winter still in its early stages, any cushion of heating oil could get chewed through very fast if the US East Coast is hit with a long, sustained bout of Arctic weather--Gary Raynaldo