Heating Oil September December Spread

The September December HO / ULSD spread reached a peak of 1.60 cents favor of September over December at the beginning of this month, coinciding with the peak in the flat price for the spot futures for HO/ULSD.

This looks to have been happening at the same time that money managers were covering their net short position in ULSD on the CME. This was also around the time that hurricane Beryl was churning around in the Atlantic basin, raising some concerns about refinery activity, and hence supply.

Since then some demand concerns have arisen, likely leading to some of the weakness in the flat price and the spread curve for HO/ULSD.A slower Non Farm Payroll jobs number earlier in the month is one piece of data suggesting lower demand. Weak Chinese PMI data and diesel demand are likely undermining HO pricing and monthly curve values in general.

Yet, despite the demand concerns, technically the spread is showing momentum that is waning to the downside. This together with the recent lows at -1.00 cents is providing support, suggesting that the spread is bottoming. Below the -1.00 cent support, the next support we see lies at -1.87 cents. Resistance for the September against December lies at +0.34 cents, then at +0.72 cents. The recent major high seen lies above at +1.60 cents

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