As millions of Americans get some much needed respite from a cold-snap that hasn’t been experienced since the words “polar vortex” had entered our English vocabulary, they slowly get back to their normal routines only to find prices of heating oil and the rest of the energy sector rallying into this new year near levels that haven’t been seen since December of 2014. As of 1:20 EST, WTI for February delivery is up 2.02% at $62.98, HO is up 0.80% at $2.0618, and RBOB is up 2.63% at $1.8389. OPEC-led production cuts coupled with expectations that U.S. crude inventories will drop for an eighth straight week, WTI is set for a mind-boggling 50% rally from last mid-summer’s lows of $42.05. A settlement above $61.63 today in WTI allows a bullish dynamic into later in Q1 with a target of $70.37 over the next 2-3 months.
OPEC cutting output by more than it has promised and supply reports from the American Petroleum Institute and the U.S. government’s Energy Information Administration having expectations of a crude draw of 3.9 million, a build of 1.5 million in distillates, and a build of 2.6 million in gasoline, should keep this melt-up in the energy sector intact. For now, we can take out the sun block and enjoy the 50 degree weather that will allow us to forget, for a brief moment, about the bone chilling “winter wind chill advisories” that many of us had just experienced.