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Heating oil futures fall

December 3rd, 2012

Heating oil futures and gasoline declined as U.S. manufacturing contracted in November and amid concern that leaders in Washington will reach an impasse on budget talks.

Futures fell after the Institute for Supply Management’s factory index slid last month to the lowest level since July 2009. The U.S. is facing a so-called fiscal cliff of automatic spending cuts and tax increases. Futures gained earlier as China’s factory output reached a seven-month high.

“The market got a dose of cold water with the ISM numbers and there seems to be a pretty wide impasse in Washington on how to proceed” on the budget, said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

January-delivery heating oil dropped 0.45 cent to settle at $3.0562 a gallon on the New York Mercantile Exchange after touching $3.0961. It was the first drop in three days.

Gasoline futures for January delivery fell 0.38 cent to settle at $2.7265 a gallon after rising as high as $2.7627.

President Barack Obama is negotiating with congressional leaders on a deal to avert $607 billion in annual tax increases and spending cuts set for January. Obama, a Democrat, wants the Republican-controlled House to agree to higher taxes on upper- income Americans to help reduce the federal deficit. Republicans want to cut spending on entitlements and other programs while keeping current tax rates in place.

Heating oil futures rose earlier after China’s Purchasing Managers’ Index reached 50.6, according to the National Bureau of Statistics and China Federation of Logistics and Purchasing. The report followed signals last week of U.S. economic gains that indicated increased fuel demand.

Heating Oil: Economic Reports

Gross domestic product grew at a 2.7 percent annual rate in the third quarter, up from a 2 percent prior estimate, revised figures from the Commerce Department showed. Applications for jobless benefits fell by 23,000 to 393,000 in the week ended Nov. 24, according to Labor Department data.

The index of pending home resales climbed 5.2 percent in October, after a revised 0.4 percent gain in September, the National Association of Realtors reported.

“You have a lot of supportive data,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “The ISM just slowed the momentum.”

The average nationwide cost for regular gasoline fell 0.4 cent to $3.387 a gallon, AAA said today on its website. That’s the lowest average since July 11. The pump price reached a 2012 high of $3.936 on April 4.

– Editors: Charlotte Porter, Richard Stubbe

- Barbara J Powell in Dallas at Bloomberg.