NEW YORK - High inventories of heating oil in the New York Harbor will likely keep differentials under pressure this week despite colder weather in the world's top heating oil market.
Numerous 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.
I'm just worried what will happen if the winter isn't cold enough, said one trader.
The advent of colder weather into the heart of heating oil country is expected to pull down some of the inventories that have been accruing with the warmer-than-normal weather so far this winter.
So far, hampered by warmer-than-normal weather stocks of heating oil have consistently topped the average range of inventories in the U.S. [EIA/S]
European traders and brokers said spot arbitrage export opportunities to ship gasoline from the Continent to the United States have remained thin since last week and a very limited number of refiners were shipping gasoline mostly on a term contract basis.
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.
In the Midwest, the end of harvest season is expected to further pressure ultra-low diesel prices, particularly in the Group Three market.
We're seeing demand drop as we come out of harvest. We're going to start seeing more (ultra-low sulfur diesel) on the market, one Group Three broker said.
Along the Gulf Coast, prices were steady as shipping restrictions continue on the Colonial Pipeline, keeping differentials for both distillates and gasolines low.
Still some diesel and gas oil are likely to arrive from Asia and the United States for ongoing contango play, traders said.
(Additional reporting by Ikuko Kurahone in London) (Reporting by Rebekah Kebede in New York and Janet McGurty in Toronto)