Key Highlights

  • Heating oil futures rose 1.15% to USD 4.98 per gallon on Tuesday, up 125.73% from a year ago.
  • Distillate stocks fell 2.5 million barrels in the week ending October 9, leaving them 12% below the five-year average.
  • Trump said he had yet to make a final decision on allowing more Russian diesel exports.
  • The IEA says gasoil and diesel market tightness extends well into 2027, with inventories slow to rebuild.

Thin Stocks Underpin Prices

Heating oil futures rose 1.15% to USD 4.98 per gallon on Tuesday. The contract is up 1.83% over the past month and 125.73% over the past year, a far larger gain than crude has recorded.

US distillate stocks fell by 2.5 million barrels in the week ending October 9, to 102.6 million barrels. That leaves inventories 12% below the five-year average, a shortfall that matters as the heating season starts. Heating oil, diesel and jet fuel are all middle distillates, and the pool has been among the hardest hit by supply disruption this year.

Russian Diesel Exports Remain Undecided

Traders are weighing a possible increase in Russian diesel exports. Trump said he had yet to make a final decision. A deal for Russia to supply 300,000 tonnes of diesel was announced this month, with more volumes to follow. EU economy chief Valdis Dombrovskis questioned whether Russia can deliver the promised volumes.

The IEA, in its October report published on October 14, said the constraint on Russian supply is a lack of operating refinery capacity, so easing export curbs does little to alter the gasoil balance. Drone strikes damaged Russian plants, and Moscow banned most diesel exports from July.

IEA Sees Tightness Extending Into 2027

The agency said the gasoil balance remains tight well into 2027 and that it does not see lost inventories replenished before the second half of next year. It noted that a seasonal surplus in early 2027 can ease prices this winter without ending the shortage. It named renewed attacks on Gulf energy sites and the Atlantic hurricane season as risks.

The pressure peaked in September. The heating oil crack spread reached a record near USD 117 a barrel in mid September, and wholesale diesel topped USD 200 a barrel in Singapore. An analyst at a Danish investment bank described US distillate stocks as the lowest seasonal level on record. NYMEX diesel futures hit a record of USD 5.262 per gallon on September 15, and the weekly US retail diesel price reached a record USD 6.529 per gallon on September 21. Prices have eased since then but remain far above levels from a year ago.

Winter Heating Costs in Focus

The EIA projects US household heating oil spending up 21% this winter. About 3% of US households heat with it.

The IEA also backed the release of about 100 million barrels of emergency stocks on October 15, including more than 20 million barrels of diesel. Gulf product exports remain at roughly half of normal, which keeps pressure on middle distillate supply.