US Inventory Draw Tightens Distillates Market, Heating Oil Nears $2.6 Despite Steady Natural Gas Prices

New York | EcoPulse24

Energy markets are showing a clear divergence between oil derivatives and natural gas, driven by US inventory pressures and crude costs on one side, and increased production and mild weather on the other. Recent US Energy Information Administration (EIA) data has shifted short-term supply risk pricing, especially in the distillate market.

Natural gas prices settled at $3.0197 per million British thermal units, with a minimal daily change of $0.0087 or 0.29%. This level keeps contracts near a four-month low. Momentum has slowed as production in the lower 48 states rose to 108.7 billion cubic feet per day in February from 106.3 billion in January, nearing December's peak of 109.7 billion. EIA data showed a withdrawal of 144 billion cubic feet for the week ending February 13, below the five-year average and last year's 182 billion. LNG export flows to eight US terminals rose to 18.6 billion cubic feet per day in February, near record highs. Warmer weather forecasts through early March are expected to reduce heating demand, keeping inventories about 6% below normal.

In contrast, gasoline prices reached $2.0032 per gallon, up $0.039 or 1.99% daily. Monthly gains stand at around 10.73%, though prices remain 3.98% lower year-over-year based on reference market contracts. Trading volumes reflect anticipation of the US driving season and refinery cost dynamics.

Heating oil prices climbed to $2.5899 per gallon, up $0.0712 daily and nearing $2.6. This was driven by a strong distillate inventory draw of 4.57 million barrels for the week ending February 13 - over triple the expected 1.4 million. Crude inventories also fell by 9.01 million barrels, reflecting robust refinery demand and tight safety margins. The derivatives market is further impacted by higher crude costs - the highest since August - amid US signals of stalled Iran nuclear talks and rising tensions near the Strait of Hormuz. The value of refined barrels has increased due to this combination of lower inventories and higher feedstock costs, tightening market balances.

EcoPulse24 Analysis:
The data reveal a structural split in the energy complex. Oil derivatives are highly sensitive to inventory shocks and geopolitical supply risks, while natural gas is governed by domestic production and weather. Continued strong draws from distillate inventories are putting upward pressure on prices unless supply improves quickly, while relative gas abundance limits any broad rally. This divergence highlights each market’s unique sensitivities and points to a rebalancing phase that could reshape fossil fuel price spreads in the coming weeks.