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 U.S. ultra low-sulfur diesel (ULSD) futures, or light heating oil,
rose to a five-month high following a near 14 percent rise in U.S.
natural gas futures prices 10 minutes before the end of the trading
session.
The arctic-like weather plaguing the U.S. Northeast and Midwest for
most of January hit U.S. southern states on Wednesday shutting down
airports and stranding motorists on highways.
Utilities with oil burning plants have had to purchase oil to run
those plants since coal, natural gas and nuclear plants are running
near full capacity, some brokers said.
"It's all hands on deck from the power guys," said Gene McGillian,
energy analyst with Tradition Energy in Stamford, Connecticut. "Some
of the utilities didn't anticipate this winter."
ULSD futures initially rose early in the session after U.S.
government data showed a steep decline, the third in as many weeks,
in distillate inventories, which include heating oil.
Brent crude oil rose moderately, supported by Middle East supply
concerns. Spillover attacks from the civil war in Syria have
hindered development of Iraq's gas and oil reserves and a major
pipeline to the Mediterranean has been blown up dozens of times,
Iraq's top energy official said on Tuesday.
Brent oil rose 44 cents to settle at $107.85 per barrel. U.S. oil
fell by more than a $1 to a session low of $96.32 after the oil
inventory figures were released. The contract pared losses to settle
5 cents lower at $97.36.
The price difference between the two contracts <CL-LCO1=R> widened
to $10.49.
Gains in U.S. crude oil were capped by a hefty build in crude
inventories. U.S. crude stocks rose 6.4 million barrels, including a
237,000-barrel build at Cushing, Oklahoma, where the U.S. oil
futures benchmark contract is priced, data from the U.S. Energy
Information Administration (EIA) showed.
Distillate inventories fell 4.6 million barrels, more than double
expectations, while gasoline stocks dropped compared with analysts
forecasts for a build.
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ULSD futures rose to a high of $3.1869 per gallon, the highest since
Aug. 29, before settling up 1.9 percent at $3.1816. The unexpected
draw in gasoline stocks caused U.S. gasoline futures to rise and
settle 1.3 percent higher at $2.6609 per gallon.
"The stronger-than-expected products demand gave the market a little
bit of a bullish tilt," said Phil Flynn, an analyst at the Price
Futures Group in Chicago, Illinois.
Investors also eyed maintenance schedules from refiners that could
curb demand for crude. Philadelphia Energy Solutions will begin a
turnaround on Wednesday at its 335,000 barrel-per-day refinery in
Philadelphia after an unplanned outage of units.
Financial markets were also nudged by a late-afternoon announcement
from the Federal Open Market Committee confirming that it will trim
its monetary stimulus by another $10 billion per month beginning in
February to $65 billion.
Oil pared slight gains just after the 2 p.m. EST (1900
GMT)announcement and U.S. stocks accelerated their selloff,
concerned that the Fed went ahead with the cut in the face of shaky
emerging market economies.
(Additional reporting by Elizabeth Dilts
in New York and Peg Mackey in London; editing by Jason Neely and Marguerita Choy)
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