Heating Oil Spreads --March/April & April/May

Overview

The March/April and April/May Heating Oil spreads saw their values one week ago fall to 1/2 the value they held at the end of January when the February futures contracted expired very strongly.

The spreads may now find some support given that the narrative we saw at the end of January has flipped. At the end of January we mentioned that the strong spot values for ULSD were attracting imports from Europe. Yesterday, we wrote the following: " Diesel shipments from the US to Europe are accelerating in February 2026, with arrivals expected to rise 25% to 366 MBPD, marking the highest level since December 2024. This surge is driven by tighter European regional balances and the reopening of the transatlantic arbitrage. Supply in Europe has tightened following a January 21 deadline that restricted imports of refined products derived from Russian crude."

Geopolitical tension is said to be supporting diesel cracks. This past weekend, Ukraine launched further attacks against Russian refineries. Drones struck the Ilsky oil refinery in southern Russia in recent days. The Ilsky refinery is one of the largest private oil processing facilities in the area.   (Euromaidanpress.com)

The past 2 weeks have seen strong US distillate demand in the DOE data. Last week's demand of 4.449 MMBPD was 764 and 935 MBPD greater than the prior 2 years. Two weeks ago, demand stood at 4.310 MMBPD, which although 289 MBPD less than in 2025 was 493 MBPD greater than seen in 2024.

One possible negative to the US diesel/distillate market may come from the increased purchases of Venezuelan crude that are being touted. The Venezuelan crude being a heavier grade is seen leading to greater distillate yields/volume from US refiners.

Technically the March / April and April / May spreads have positive momentum basis their daily charts. The March April spread has support at 771-772, then at the 715 area. Next support is seen at the 658-667 area. Upside resistance lies at 945-949 and then at 1122-1125.
For the April May spread, support comes in at 330-333 and then at 279-282. Resistance is seen at 456-460 and then at 492-495.

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This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

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