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Heating Oil notches 3-day climb as Saudi Arabia halts crude shipments through key waterway

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July 26th, 2018

Heating Oil futures logged a three-day winning streak Thursday, getting a lift as Saudi Arabia halted crude shipments through a Red Sea waterway after accusing Iran-allied rebels of attacking a pair of tankers.

September Brent crude futures LCOU8, +0.89%  rose 61 cents, or 0.8%, to end at $74.54 a barrel on ICE Europe. Meanwhile, the U.S. benchmark, September West Texas Intermediate crude CLU8, +0.51% rose 31 cents, or 0.5%, to $69.61 a barrel.

Saudi Arabia temporarily ended oil shipments through the Bab el-Mandeb strait, which joins the Red Sea to the Gulf of Aden, after saying that Houthi rebels attacked two very large crude carriers operated by Saudi National Shipping Corp. in the Red Sea on Wednesday. The move is the latest clash in the war between an Arab military coalition and the rebels for control of Yemen.

“Saudi Arabia’s decision to halt crude shipments through the Bab-el-Mandeb strait underscores just how serious the standoff with Iran could become” with U.S. sanctions against Iran set to snap back on Aug. 6, said Helima Croft, global head of commodity research at RBC Capital Markets, in a note.

“While neither ship suffered serious damage, the danger to vessels will undoubtedly rise if the attacks become more frequent as Iran and its proxies have access to advanced weaponry,” she said.

Analysts at Commerzbank said roughly 4.8 million barrels of crude and oil products are transported through the strait each day, constituting around 10% of seaborne oil.

“Depending on how long the disruption lasts, the supply of oil in the Mediterranean and Atlantic regions could tighten, which should lend support to the Brent price,” they wrote.

WTI crude added to gains after jumping Wednesday in the wake of an unexpectedly large drop in U.S. inventories. The Energy Information Administration said crude stocks fell by 6.1 million barrels in the week ended July 20, surpassing the 2.9 million barrel decline penciled in, on average, by analysts.

September natural gas NGU18, +0.07% rose 0.7 cent to end at $2.762 per million British thermal units after the Energy Information Administration said underground storage stocks rose by 24 billion cubic feet in the week ended July 20 to 2.273 billion cubic feet. That remains well below the five-year average of 2.83 billion.

In other energy trade, September gasoline RBU8, +1.43%  rose 3.15 cents to $2.117 a gallon, while September heating oil HOU8, +1.04%  gained 2.49 cents to $2.1809 a gallon.

 - MarketWatch

See Also: Crude Oil, Natural Gas, Heating Oil, Unleaded Gas, Ethanol, Gasoline Blendstock