NEW YORK -- Heating oil prices had their biggest gain in more than two years yesterday and gasoline prices also rose as buyers replenished inventories depleted by months of low refining rates.
Distillate fuel inventories, including heating oil and diesel, are down 26 percent from a year ago, while gasoline supplies are down 8.1 percent.
At least one company was forced to buy heating oil futures today for delivery next month, traders said. There was also speculation that refiners can't make enough gasoline for the peak summer driving season.
"We've never really recovered on the supply side after the winter," said John Kilduff, senior vice president of energy risk management at Fimat USA Inc. in New York.
Heating oil for May delivery rose 6.07 cents, or 8.6 percent, to 76.85 cents a gallon on the New York Mercantile Exchange, its largest one-day gain since March 1998 and the highest price since March 31.
Prices are down 23 percent from a nine-year high of $1 a gallon Jan. 31. Gasoline for May delivery rose 2.47 cents, or 3 percent, to 85.33 cents a gallon, also the highest price since March 31.
The American Petroleum Institute reported a larger-than-expected 2.68 million-barrel drop last week in U.S. distillate fuel inventories to 94.86 million, their lowest level since May 1996. That helped heating oil prices rise, though some traders were caught by surprise at the magnitude of yesterday's rally.
A large unnamed buyer in need of immediate supplies purchased more than 75,000 barrels of heating oil from a New York-area refiner, Bridge News said. The amount is equal to 75 futures contracts. There are about 17,000 outstanding May heating oil futures, which expire April 28.
Heating oil buyers "may have been trying to wait out the heating season," said Tim Evans, senior energy analyst at IFR Pegasus in New York. But inventories kept falling even as the heating season came to a close, and they "just had to pay up."
Gasoline gained after the weekly API report showed that U.S. refiners lost ground in efforts to build up gasoline supplies for the summer driving season.
While refiners imported more crude oil and increased processing rates last week, inventories of gasoline fell unexpectedly by 2.84 million barrels, or 1.4 percent, to 201.19 million barrels.
Demand for the motor fuel, meantime, rose to its highest rate of the year.
"It was a bullish report for gasoline, with implied demand up at 9 million barrels a day," Kilduff said.
U.S. supplies now are 17.7 million barrels lower than a year ago, vs. a year-on-year shortfall of 14.7 million the week before, the API report showed.