Heating oil is produced from the refining of crude oil. The refining of crude yields 50% gasoline and 25% heating oil. This product of crude oil is also called distillate or Number 2 oil. In Europe, heating oil is called gas oil.
Heating oil is used primarily to heat homes in Northeast America. The US produces roughly 85% of its heating oil and imports the rest from Canada, Venezuela and the Virgin Islands. The production of heating oil generally increases in winter to ensure sufficient supply of oil to meet the seasonal demand. Heating oil futures are traded on the New York Mercantile Exchange (NYMEX) and on the ICE Europe Exchange.
Heating Oil Futures: How Weather Impacts Price
Traders dealing in heating oil futures should consider checking weather reports regularly. The importance of weather reports increases substantially during the winter months (from December to February). The focus should be on Northeast USA, as this region accounts for 80% of America’s heating oil consumption.
Trading Heating Oil Futures: Tips
Here are some tips when trading heating oil futures:
- Heating oil prices typically move in sync with that of crude oil
- Most profit-making opportunities arise during the winter months. Prolonged periods of extreme cold or an unanticipated cold wave in Northeast USA can cause a rally in the price of heating oil futures
- Buying heating oil futures in winter does not assure success in futures trade. Profit-making opportunities arise only when the weather is colder than anticipated. This results in the higher-than-expected consumption of heating oil during the season, boosting demand.
Specifications for trading Heating Oil with easyMarkets
easyMarkets Symbol for Heating Oil: HEO
Quote convention: USD per metric ton, HEO/USD = 1.7200 USD per metric ton.
Expiration date: All HEO deals will expire at 12:00 GMT one business day before the last business day of the month preceding the delivery month.
Trading hours: Trading is conducted 02:00 until 21:00 London time, Monday to Friday. Outside these hours no opening or closing of deals will be allowed.
Availability: HEO trading is not available in the USA and some other regions. Check with your account manager or Personal Dealer if it is available in your region.