Heating oil prices this week are closely tied to the IMF and its potential involvement in bailing out Greece’s economy. (image: matanews.com)

Last week brought major increases in heating oil prices early on, but falling prices offset those gains on Thursday and Friday. The same factors that brought down prices late last week will likely do the same early this week: Greece’s financial crisis continues to put a drag on the euro, which will continue to drive up the value of the US dollar. As the value of the dollar increases, oil becomes a less attractive investment to foreign traders, usually leading to lower crude and heating oil prices.

The next development in Greece’s fiscal drama will be the meeting of EU ministers on Thursday and Friday. Ministers will discuss, among other things, how best to rescue the Greek economy. If a plan involving only EU support is hammered out, the euro will likely strengthen and bring higher oil prices. If the rescue plan requires assistance from the International Monetary Fund (IMF), the value of the euro will continue to drop, taking oil prices down with it.

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Crude oil prices over the course of today, March 19. (image: ft.com)

Crude and heating oil prices fell sharply today, with crude oil dropping the most it has in six weeks. The cause behind today’s falling prices was the strong US dollar, which makes commodities prices in dollars more expensive for traders who hold other currencies. This lowers demand for those commodities, such as crude and heating oil futures, which pressures prices to go down.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Down 2.0 percent, $80.57 per barrel.
Heating oil (April 2010 contract): Down 2.1 percent.

Crude oil prices over the course of today, March 18. (image: ft.com)

The value of the dollar drove oil markets today and led to lower crude and heating oil prices. A strong dollar tends to lower the prices of commodities priced in dollars, since they become more expensive for traders who hold foreign currencies, which drives down demand. OPEC’s lack of concern with member compliance could keep oil markets flooded with supply, as OPEC nations produce more oil than allowed by their quotas.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Down 0.9 percent, $82.20 per barrel.
Heating oil (April 2010 contract): Down 1.0 percent.

Crude oil prices over the course of today, March 17. (image: ft.com)

The price of heating oil increased today as inventories of distillates, which include heating oil and diesel, fell by more than expected. That inventory decline, combined with a drop in US oil imports, led some to forecast an eventual supply crunch that would lift oil prices. OPEC announced today that it would maintain its current production quotas even though it foresees growing oil demand, which supported higher prices across all oil markets.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Up 1.5 percent, $82.94 per barrel.
Heating oil (April 2010 contract): Up 1.2 percent.

Crude oil prices over the course of today, March 16. (image: ft.com)

Weakness in the dollar led the price of crude oil to its biggest gain in four weeks, defying predictions that oil markets would be cautious ahead of announcements by the Federal Reserve and OPEC. The price of heating oil followed crude’s lead, rising substantially despite the spring-like temperatures that most of the Northeast, the world’s largest heating oil market, is experiencing today. The Fed’s announcement that interest rates would be kept low occurred shortly before the market closed, but had been anticipated throughout the day and lifted oil prices.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Up 2.4 percent, $81.71 per barrel.
Heating oil (April 2010 contract): Up 2.8 percent.

Maine farm. (image: podchef via flickr.com)

Heating oil prices in Maine have risen one penny over the last week, according to the latest Governor’s Office of Energy Independence and Security’s survey, making the state-wide average $2.69 a gallon. Prices ranged from $2.40-$3.00, with the lower prices found in the southwest and the highest in the west.

Crude oil prices over the course of today. (image: ft.com)

A variety of concerns encouraged investors to seek out the safety of the dollar, raising its value against other currencies. The dollar’s strength dragged down oil prices, because it made commodities priced in dollars more expensive for traders who hold other currencies. Oil traders were cautious ahead of this week’s meetings of the Federal Reserve (on Tuesday) and OPEC (on Wednesday), and worries that China’s central bank could take action to slow that country’s economic growth. Unexpected policy moves by the Fed, OPEC, or China could have a profound impact on oil prices.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Down 1.8 percent, $79.76 per barrel.
Heating oil (April 2010 contract): Down 1.7 percent.

The Federal Reserve's decision on interest rates tomorrow will have an effect on oil prices. (image: wikimedia.org)

Last week, inventory and consumption data, a fluctuating dollar and bouncing stock markets all combined to make for a lot and peaks and troughs in heating oil prices that amounted to a three-cent-per-gallon price increase from Monday to Friday.

This week, the main event to watch for tracking heating oil prices will be the meeting of the Federal Reserve to set interest rates. Most expect the Fed to keep interest rates at their super-low levels to encourage lending and help speed along the sluggish economic recovery in the US. Assuming the Fed keeps rates steady, the value of the US dollar will likely drop in response, making crude oil a more attractive investment and driving up oil prices.

On the other hand, demand for heating oil has already dropped off significantly due to warmer weather in the Northeast last week. As that warm weather continues, heating oil demand will continue to decline and drive prices lower, especially if lower consumption patterns are reflected in this week’s report on US distillate inventories.

So look for economic factors bringing moderately higher heating oil prices on Monday and Tuesday, with the possibility of supply and demand data flattening prices out later in the week.

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Crude oil prices over the course of today, March 11. (image: ft.com)

Oil prices continued their climb Friday morning after the IEA increased its estimate of oil demand in 2010, but the release of a report showing a decline in US consumer confidence reversed that trend and sent crude and heating oil prices sliding. Low consumer confidence will act as a drag on consumer spending, and that will reduce demand for oil. The response by oil traders to the consumer confidence numbers underlined how closely tied oil prices are to economic data and the overall health of the global economy.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): Down 1.1 percent, $81.25 per barrel.
Heating oil (April 2010 contract): Down 1.0 percent.

Crude oil prices over the course of today, March 11. (image: ft.com)

Inflation in China pushed oil prices lower this morning, as traders speculated that China would move to tighten its monetary policy, which would have the effect of slowing the growth of its economy and curbing oil demand. Many analysts expect growing Chinese energy demand to be sufficient to push oil prices higher through the rest of the year, so any signs of slower growth weighs on oil markets. Despite this bearish news, crude and heating oil prices recovered as Wednesday’s drop in inventories of distillates (including heating oil) and gasoline continued to support higher prices.

Today’s closing prices on NYMEX

Crude oil (April 2010 contract): No change, $82.10 per barrel.
Heating oil (April 2010 contract): No change.