An exchange traded fund that tracks heating oil futures was on fire Wednesday after energy demand spiked during the recent wintry blast that gripped the East Coast.
The United States Diesel-Heating Oil Fund (NYSEArca: UHN), which follows futures contracts on heating oil or No. 2 fuel, gained 6.3% Wednesday as Nymex heating oil futures rose 5.5% to $1.0206 per gallon.
Meanwhile, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, was up 2.2% and United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, was 3.5% higher on Wednesday. WTI crude oil futures were trading 2.3% higher to $32.2 per barrel while Brent crude was 3.7% higher to $33.0 per barrel.
Heating oil futures surged after U.S. data revealed an increase in weekly demand for energy products like heating oil when a cold front swept across East Coast and forecasts for further cold temperatures later this week, Reuters reports.
The U.S. energy Information Administration revealed inventories of distillates, which include heating oil, dipped by over 4 million barrels, compared to expectations of a 2 million increase. However, some warn that the drawdown and rally in energy may be short-lived.
“The draw in distillate stocks is bullish, but we know there was cold weather in the United States in the last week, so I would say the reason behind the draw has something to do with the cold winter weather and, as such, the impact should be short-lived,” Tamas Varga of PVM Oil Associates told Reuters.
The eastern U.S. could experience above-average temperatures as mild air from the Gulf of Mexico pushes northward, according to AccuWeather. Consequently, the warmer outlook could sap energy heating demand in the month ahead.
Energy-related commodities were also rallying on speculation that Russia and the Organization of Petroleum Exporting Countries were in discussion on a possible plan to address the global supply glut, Reuters reports.
United States Diesel-Heating Oil Fund
Max Chen contributed to this article.