Heating Oil November 2024 February 2025 April 2025 Butterfly

The November 2024 vs. February 2025 vs. April 2025 butterfly is currently showing momentum that favors buying February ( twice) versus selling one November and selling one April. The momentum suggests that the front end will lose ground faster than the further back part of the HO curve.

Reasons for this may be concern over Chinese demand and further exports from there, slower demand in the U.S. as suggested by the NFP jobs report seen Friday, continued ample supply in the U.S. as refinery runs have been high over the past month or so. A weakening of the Gasoil structure as we detailed today in our Energy Market Update could suggest that the robust U S distillate export levels seen of late may be throttled back.

The current Nov 2024 vs Feb 2025 vs April 2025 butterfly sees support for the wings ( Nov & April) at the recent low of early June at minus 3.8 cents. Upside resistance for the wings versus buying of the February is seen at  -1.75 cents and then up at -1.15 cents.

The past 3 years data for this butterfly have been severely skewed by various events. In 2021 the butterfly was negatively impacted by Covid, which hurt demand and thus the fly going more negative as the front end was sold. Then during 2022 and 2023 the butterfly was positively supported by by sanctions levied against Russia and the resulting fear/belief that European supply would be much lower due to restrictions on flows from Russia, thus supporting HO/Gasoil outright prices during that period and hence the front end of the distillate curves.

In the 2021 butterfly, in early calendar year 2021, the November & April contracts fell to find support at -2.35 / -2.70 cents versus February. The relationship saw November and April rise to their best value near -86 points versus February on expiration. But, overall before expiration, the butterfly resisted getting narrower than -1.3 and -1.0 cents.

In the 2022 butterfly, the low for the November & April contracts versus February was seen at a value of -4.2 cents in August of 2022 before the November contract expired.  The butterfly went out on expiration trading at a premium for the wings versus the February, likely due to sanctions versus Russia. but prior to the last month that November was still traded, much of the time the butterfly resisted rising over +7.5 cents favor of the wings versus February.

In last year's butterfly, there were several lows seen in the -2.80 / -2.90 cents area, thus finding support for the buying of the wings versus selling two contracts of February. Resistance for the November and April versus February was seen at the +9.65 cent and then +14.5 cents areas. Again this butterfly seems to have been positively impacted favoring the front end of the HO curve due to concerns over less supply from Russia and what that meant for Atlantic basin HO ( and crude oil)  values.

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