NEW YORK - Expectations of cold weather in the U.S Northeast is seen supporting stronger heating values in the region, the world's largest consumer of the fuel, traders said on Monday.
I think just the outlook for the next coming weeks being decent cold is bringing some buying into the market, one Northeast distillates trader said of the heating oil strength.
But any upside will be limited by the high inventories of the fuel both on and offshore, traders cautioned, keeping differentials under pressure.
According to the National Weather Service, the next week is expected to be warm, keeping heating degree days below normal levels.
But their longer term forecasts show a colder spell on beginning on Wednesday but the NOAA says there is no clear clut model yet as to how long it will remain.
Cargoes of Russian gas oil off the coast of the New York Harbor will keep prices depressed in the short-term, traders said, as the high land inventories will take a while to drawdown.
European traders and brokers said spot arbitrage export opportunities to ship gasoline from the Continent to the United States have remained thin. Trade was seen confined to term basis cargoes, they said.
Relatively cold weather across Europe have been supporting spot differentials on physical gas oil in the inland market. But high inventory levels are likely to shut the import demand window. Refineries in the region are running at about 80 percent of capacity.
Along the Gulf Coast, gasoline was seen getting some support from the outage of one of the FCC units at BP's Texas City refinery but it sources familiar with operations say the outage is expected to be short-lived.
In the Midwest, some support is seen from the power outage at Sunoco's Toledo, Ohio refinery over the weekend, but the end of harvest season is seen cutting back on demand of diesel, traders said.
(Additional reporting by Ikuko Kurahone in London) (Reporting by Janet McGurty in Toronto, Haitham Haddadin in New York and Kristen Hays in Houston.)