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Heating oil futures surged to the highest level since May as colder weather in Europe boosted gasoil futures.
Heating oil futures gained as front-month gasoil’s premium to the second-month contract, a price structure known as backwardation, increased to the widest in almost a month amid colder weather in Europe that has increased demand for home-heating fuel.
“Because of the cold weather in Europe, the thought is that some of our heating oil would get displaced to Europe,” said Phil Flynn, vice president of research at PFGBest in Chicago.
Heating oil futures for March-delivery rose 2.36 cents, or 0.7 percent, to $3.1943 a gallon at 11:13 a.m. on the New York Mercantile Exchange. Prices touched $3.2208, the highest intraday level since May 3.
February gasoil rose $8 to $996.25 a metric ton on the ICE Futures Europe exchange in London. The contract traded at as much as $2.25 a metric ton more than March, the biggest spread since Jan. 12. The difference was $1 as of 11:14 a.m. in New York.
“You’ve probably got a squeeze going on over there with the cold weather,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.
Heating oil’s premium to March gasoline rose to 25.66 cents from 24.28, the widest difference since Jan. 17.
“With the latest activity data indicating an economic upturn and, more importantly, colder temperatures in Europe, demand is likely to drive prompt distillate prices higher,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said in an e-mailed report today.
Heating oil futures pared gains after Federal Reserve Chairman Ben S. Bernanke said the U.S. still has “a long way to go before the labor market can be said to be operating normally.”
Gasoline futures for March delivery gained 0.98 cent, or 0.3 percent, to $2.9377 a gallon on the exchange.
Regular gasoline at the pump, averaged nationwide, was unchanged at $3.48 yesterday, according to AAA data. Prices were 11 percent above a year earlier.
- Barbara J Powell in Dallas at Bloomberg.