Heating oil falls on concern that fuel use is slowing

Heating oil slid on reports that U.S. consumer spending slowed and Chinese manufacturing slipped, indicating less global growth and a drop in fuel demand.

Futures declined as the Commerce Department reported that August consumer purchases rose 0.2 percent after a 0.7 percent increase in July. A gauge of Chinese manufacturing shrank for a third month. European inflation jumped to the highest level in almost three years in September as the region’s leaders try to contain a worsening sovereign debt crisis.

“There’s all this uncertainty, and it’s still in the back of everyone’s head that we’re heading for a global recession,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.

October-delivery heating oil fell 1.02 cents, or 0.4 percent, to $2.8079 a gallon at 1:43 p.m. on the New York Mercantile Exchange. The November contract lost 0.94 cent, or 0.3 percent, to $2.8172.

October heating oil and gasoline contracts expire at the end of floor trading today.

Heating oil has lost 8.8 percent this month and is down 4.3 percent for the quarter on concern that the U.S. economic recovery has stalled and the European debt crisis that began in Greece will spread, endangering the region’s economy and reducing global growth.

Distillate demand

Energy Department monthly data showed distillate demand averaged 3.45 million barrels a day in July, less than the 3.58 million estimated in weekly reports.

“People are asking how is Europe going to play out, what’s going to happen to demand,” said David Pursell, a managing director at Tudor Pickering Holt & Co. LLC in Houston. “The volatility is phenomenal, even intraday now because people don’t know how it’s going to play out.”

The Commerce Department report showed that U.S. incomes unexpectedly dropped for the first time in almost two years. A report Thursday showed that U.S. consumer confidence slid to the second-lowest on record. The Bloomberg Consumer Comfort Index dropped to minus 53 in the period ended Sept. 25 from minus 52.1 the prior week.

“There are further signals the U.S. economy is slowing,” McGillian said.

The euro-area inflation rate jumped to 3 percent this month from 2.5 percent in August, the European Union’s statistics office in Luxembourg said today in an initial estimate. That’s the biggest annual increase in consumer prices since October 2008.

’Disappointing’ signals

“We have disappointing economic signals and there still remains a great deal of uncertainty in Europe,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Conn.

The reading of 49.9 for the September Chinese purchasing managers’ index, released by HSBC Holdings Plc and Markit Economics on Friday, was unchanged from August and compared with a preliminary 49.4 figure published last week.

The drop in futures coincided with a broad decline in equities and commodities and a surge in the dollar, which reduces the investment appeal of commodities.

The S&P GSCI Index of 24 raw materials lost 1.5 percent at 1:46 p.m. in New York and the Standard & Poor’s 500 Index of stocks fell 0.9 percent. The U.S. currency advanced 1.1 percent against the euro.

Gasoline for October delivery rose 1.06 cents, or 0.4 percent, to $2.6298 a gallon, after touching $2.5769. Futures have declined 13 percent in September and in the quarter.

The more actively traded November contract increased 1.56 cents to $2.5742 a gallon on the exchange.

Regular gasoline at the pump, averaged nationwide, dropped 1 cent to $3.445 a gallon Thursday, according to AAA data. Prices have declined every day since Sept. 9 and are the lowest since March 2.