Heating oil in tailspin as debt crisis deepens

5 February 2010

Written by John King

Heating oil prices fell dramatically during trading yesterday, only days after posting the strongest gains of the year.

At the close of trading on the New York Mercantile Exchange, the headline heating oil contract settled at $1.93 (€1.40) a gallon, down more than eight cents on its opening price.

On Tuesday, the commodity had soared above the $2 mark after strong corporate earnings reports from a number of US firms.

However, the focus of attention has now moved across the Atlantic as the crisis in Greece deepened and concerns about the debt burden in Spain and Portgual were also raised.

"The crisis in Europe, Greece, Portugal, Spain is going to put downward pressure on the euro until they are able to sort it out and confidence returns," said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore, speaking to Reuters.

In turn, this will make dollar-linked commodities such as crude and heating oil less attractive to foreign buyers.

The dollar has enjoyed a resurgence after many months of weakness, with the gathering pace of recovery providing support for the greenback.

Click here for a home heating oil quote