ENERGY OVERVIEWS

Crude oil | Gasoline | Heating Oil | Natural Gas

Heating Oil Overview | Contracts | Quote-board

Heating Oil, also known as No. 2 fuel oil, accounts for about 25% of the yield of a barrel of crude, the second largest "cut" after gasoline. In its early years, the heating oil futures contract attracted mainly heating oil wholesalers and large consumers. It soon became apparent that the contract was also being used to hedge diesel fuel, which is chemically similar to heating oil, and jet fuel, which trades in the cash market at a usually stable premium to NYMEX Division heating oil futures.

Today, a wide variety of businesses, including oil refiners, wholesale marketers, heating oil retailers, trucking companies, airlines, and marine transport operators, as well as other major consumers of fuel oil, have embraced this contract as a risk management vehicle and pricing mechanism. The recent imposition of strict federal sulfur standards for diesel fuel have the potential to increase price volatility in some markets.

Seasonal aspecs of supply and demand are already factored into the futures prices and these prices do not move in tandem with the respective cash market. Additionally, the option premiums do not move in tandem with the underlying futures contracts. Seasonal and economic factors influence the relative prices of heating oil, gasoline, natural gas, propane, and crude oil.

To learn more, contact our professional consultants today: 1-800-974-8744

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