Trump administration taps heating oil reserve in bid to lower prices as election looms

The U.S. Department of Energy said Wednesday it will loan up to 315M barrels of heating oil stockpiled in Maine, Massachusetts, and Connecticut in an effort to bring down soaring prices that have emerged as a key issue ahead of the November 3 midterm elections.

One-third of New England homes use heating oil, including about half of homes in Maine, where the cost of heating oil has soared by ~80% from last year.

Heating oil ​is similar in composition to diesel fuel, whose average retail prices have hovered at ~$6.32/gal in recent days after hitting a record $6.52/gal last month, according to AAA.

Analyst Tom Kloza at Gulf Oil said on social media that the ​move was "puzzling and probably inconsequential" and ​likely would have no impact on ⁠prices.

In an effort ⁠to control crude oil prices, the administration has already agreed to loan 172M barrels of crude from the Strategic Petroleum Reserve, which has fallen to its lowest level since 1982.

The U.S. released up to $42M in Defense Production Act funding this week for ​initial work on the Constitution pipeline project, which would ship natural ​gas produced in Pennsylvania to heat homes in New York and New England; New York has blocked the project on environmental grounds.

Russia ‌will dispatch its first tanker with diesel for the U.S. on Thursday, carrying 40K metric tons of the fuel, Deputy Prime Minister Alexander Novak said Wednesday.

Russia recently lifted its ​self-imposed ban on diesel exports that was implemented ⁠to cope with domestic shortages triggered by Ukrainian drone attacks on refineries, ​after reaching its supply deal with President Trump.

Trump has said Russia would immediately export 300K metric tons, ​or 2.25M ​barrels, followed ⁠by 500K tons in November and 1M tons "immediately thereafter."

On Wednesday, crude oil futures closed little changed as traders considered possible progress ‌toward Russia-Ukraine talks against continued strikes on shipping in the Strait of Hormuz and attacks by Iran-backed Houthi militants against Saudi Arabia.

Russia's President Putin agreed to resume U.S.-mediated peace talks with Ukraine as soon as next month, ​the Kremlin said, after Putin met U.S. envoy Steve Witkoff in St. Petersburg.

In the Middle East, mediators reportedly are scrambling to revive talks with Iran, fearing potential new hostilities as the U.S. moves another aircraft carrier to the region and Israel warns it has prepared plans for possible new strikes.

Despite continuing attacks, oil shipments out of the Middle East have surpassed pre-war levels, as Kpler reported flows through the Strait of Hormuz and alternative export routes averaged more than 24M bbl/day in the week through October 18.

Meanwhile, the U.S. Energy Information Administration reported a bigger-than-expected weekly draw in domestic crude oil stocks, while distillate inventories rose unexpectedly and gasoline stocks fell.

Commercial crude oil stocks excluding the Strategic Petroleum Reserve fell by 3.1M barrels to 412.5M barrels in the week ended October 16 and were 3% below the five-year average for the time of year, the EIA said.

U.S. gasoline inventories fell by 3M barrels to 205.3M barrels and were 5% below the five-year average, and distillate fuel stocks rose by 1.7M barrels to 104.3M barrels and were 9% below the five-year average for the time of year.

Front-month Nymex crude (CL1:COM) for December delivery fell 0.7% to $97.15/bbl, while front-month Brent December crude (CO1:COM) gained three cents to $108.82/bbl.

Front-month Nymex ULSD (HO1:COM) for November delivery sank 3.3% to $4.7633/gal following news of the U.S. heating oil release, but front-month Nymex November RBOB gasoline (XB1:COM) gained 0.1% to $3.1205/bbl.

Front-month Nymex natural gas (NG1:COM) for November delivery sank 5.8% to $2.790/MMBtu, as "heating demand is beginning to increase seasonally, but forecasts still lack the sustained cold needed to keep consumption elevated through the end of October," Gelber & Associates said in a note.

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