The differential for high sulfur heating oil barges in New York Harbor
rebounded sharply Friday after reaching the lowest level in a number of years
on warm weather and overblending.

S&P Global Platts assessed benchmark Atlantic Coast HSHO at the NYMEX
March ULSD futures contract minus 18 cents/gal, compared with minus 21.75
cents/gal on Thursday, the lowest differential since NYMEX switched its
futures contract from heating oil to ULSD in spring 2013.

BP offered heating oil barges lower Thursday to NYMEX March ULSD minus
21.50 cents/gal, with no buyers. But it was heard bid at minus 18.25 cents/gal
on a quiet Friday of trading in the Northeast, where many people had the same
forecast as given on Groundhog Day: a cold February.

“I guess somebody should have shot that groundhog. He missed the forecast
again,” one trader said.

He noted another major use is for blending the 2,000 ppm sulfur grade
into 500 ppm sulfur, or S500, heating oil. “And the demand for S500 has just
fallen off the cliff. That’s put added pressure on heating oil on a prompt
basis,” he said. “I wouldn’t say it’s warm there, but it’s probably warmer
than suppliers would want to see. They may have overblended to start with.”

“It all evens out,” a second trader said. “We had that brutal cold
stretch. Now we’re having warm weather. There’s no snow on the ground here.”

US imports of Canadian heating oil have tapered off lately, with just one
ship from Irving Oil unloading 95,000 barrels of heating oil in Maine this
week, according to US Customs Bureau data. But Rolympus brought in 316,000
barrels of gasoil into Connecticut on Wednesday from Russia that was likely
heating oil grade.

That could have helped pressure USAC heating oil to a rare parity with
the Gulf Coast on Thursday. Gulf Coast heating oil remained at NYMEX March
ULSD minus 21.75 cents/gal on Friday.

The first trader said New York should not be the same as the Gulf Coast
because of Colonial Pipeline transportation costs of more than 5 cents/gal.

“But it can happen,” he said. “It usually doesn’t last very long. But
supplies are great and you got a lot of barrels coming in and not much
demand.”

–Matthew Kohlman, matthew.kohlman@spglobal.com

–Edited by Richard Rubin, richard.rubin@spglobal.com

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