Distillate futures closed US trading sharply higher Wednesday, holding onto boosts seen in the wake of an unexpectedly bullish inventory report released in the morning by the Energy Information Administration.
NYMEX April heating oil settled up 3.41 cents at $2.9154/gal, while the May contract closed trade 3.80 cents higher at $3.0368/gal. Front-month heating oil expires at the close of US trade on Thursday.
ICE April gasoil was up $14/mt at $916/mt at the time of the 2:30 p.m. EDT (1830 GMT) NYMEX market settle.
The climb in distillates outpaced movements in crude: NYMEX May crude closed 24 cents higher at $96.58/b after bouncing back from an overnight retreat during afternoon trade.
ICE May Brent settled up 33 cents at $109.69/gal.
NYMEX April RBOB closed US trade 49 points higher at $3.1155/gal.
Both distillate contracts jumped following the release of the EIA's weekly fuel inventory report, which showed an unexpectedly large 4.5 million barrel plunge in US distillate stocks as implied demand ticked sharply upward.
"The latest draw [in distillate stocks] was driven by strong implied demand caused in part by cold weather and reinforced by lower refinery production and only partly offset by higher net imports," analysts from BNP Paribas said in a note.
"Stocks on the important East Coast [home of the New York Harbor-delivered NYMEX heating oil contract] drew by 1.3 million barrels and remain 30% below a year ago."
US distillate inventories are now at their lowest level since the week ended November 30.
Front-month Brent's premium to NYMEX crude widened to $13.11/b at 2:30 p.m. EDT, retreating from the intraday low of $12.53/b seen Tuesday.
The EIA reported a 3.256 million-barrel build in domestic crude inventories, and a 439,000-barrel jump in stocks at Cushing, Oklahoma, delivery point for the NYMEX crude contract.
The US dollar index hit a near 8-month high during US trade on Wednesday, as the euro fell below the 1.28 mark for the first time since November 21 and held. At 2:30 p.m. EDT, the dollar index was up 0.40% at 83.210.
"The situation in Cyprus is going to be rough for a long time to come," John Kilduff, of Again Capital, said in a note. "It may not be related, but Italy had a difficult bond auction this morning, feeling the heat over their political disarray. The troubles for Europe just won't go away."
The UK's Office of National Statistics released another estimate of Q4 2012 GDP, showing a decrease of 0.3% between the third and fourth quarter, unrevised from the previous estimate. The ONS attributed the decrease in GDP to a fall in gross capital formation and a GBP6 billion net trade deficit.
US equities markets retreated sharply in US morning trade after a largely negative European session, though they rebounded somewhat during the afternoon. The Dow Jones Industrial Average was down 0.19% at 14,532.2 at 2:30 p.m. EDT, while the S&P 500 was 0.09% lower at 1,562.35.
