March Heating Oil vs WTI crack spread

January 20,2026

The March heating oil crack spread has risen over $3 since last Thursday. The strong rise in the weather demand picture in the US --evidenced by the sharp rally seen in NG futures--has boosted the crack spread. Also, concern over supply into Europe has likely underpinned the distillate crack spread.

Several weeks ago, in discussing the front end heating oil crack spread, we had mentioned that the weakness seen in the crack was due to strong distillate production by refiners as they sought to cash in on the very high margin offered by that portion of the barrel. Although, last week's DOE data saw distillate production down 19 MBPD on the week. The production level of 5.296 MMBPD still was greater than that seen in the prior 2 years. Those output levels were 5.183 and 4.902 MMBPD.

In our prior report on the crack spread, we had mentioned that the ability for the crack to rise was :""based upon how cold the Northern hemisphere will be this winter and by how much the Russian fuel supply is actually decreased. "Well, those 2 factors are front and center the past few days.

Today, we saw this : " The strength in the European middle distillate market coincides with the EU’s ban on refined product imports produced from Russian oil. The ban comes into effect on 21 January. While trade flows have had time to adjust to the ban, it may still lead to some disruption, as per ING commentary."

And as for the colder weather in the Northern Hemisphere. We have seen this the past 2 days. " Colder weather across parts of Europe, coupled with an Arctic blast in China, are expected to drive European gas prices higher as benchmarks must remain competitive to secure LNG cargoes. (WSJ)" The cold snap in the US is seen lasting into February, as per Quantum Commodities. The immediate trigger to the NG futures rally was a powerful Arctic cold wave sweeping across large parts of the Midwest, Northeast, and central United States. Forecast models now show temperatures plunging 15 to 25 degrees Fahrenheit below seasonal norms in several high-consumption regions.

Distillate demand in last week's DOE data was supportive, rising by 901 MBPD on the week to a strong figure of 4.096 MMBPD, beating the prior 2 years demand by 257 and 451 MBD. Given the cold weather being seen in the US and forecasts for the cold to remain in place, we expect the distillate demand figures from the DOE to stay strong. 

Thus, the rally in the HO CL crack spread is well warranted. The momentum remains positive for the March crack spread, although in a day or two it will be near overbought. The crack spread for March is testing the daily chart's upper bollinger band, which is a slight cautionary signal to the bulls. The upper bollinger intersects at about $36.05-36.10. The spread is currently valued at $36.10, but has been as high as $36.25 today. Resistance above lies at $36.69-36.86 and then at the $38.15 area. Pullbacks should see support at $33.65-33.70. Ten days ago, the crack was valued at about $30.35.