1. Crude Oil Heating oil is a by-product of crude oil. Refined product prices typically
move together over time. Refined product prices respond to movements in crude oil spot prices but generally lag behind it.
2. Refinery Capacity In the United States there hasn't been a new refinery built since 1976. Currently,
US refinery utilization averages around 90%. That leaves very little extra capacity to compensate for outages. Therefore,
during peak demand months, unexpected refinery outages can result in local supply disruptions that result in temporary price
3. Weather An unexpectedly long and cold winter in
the Northeast can increase the demand for heating oil, causing prices to move higher. However, oil companies begin to ramp
up production of heating oil before the winter season begins to ensure ample supplies of heating oil to meet the expected
winter demand. (Beware of brokerage firms that try to sell you on far out
of the money call options as a sure bet.)
4. Inventory Reports There are
two major weekly inventory reports that are helpful in your research and trading of heating oil futures and heating oil options.
The American Petroleum Institute publishes their report on Tuesdays, and the US Energy Information Administration publishes
their report on Wednesdays. These reports are very closely watched. They summarize crude oil, heating oil and other refined
product inventories, as well as refinery utilizations rates in the United States.
5. Diesel Demand Government subsidies have increased the demand for diesel fuel in Eurpoe. Since heating oil
and diesel are both distillate fuels, incresed demand for diesel fuel can push up the price of heating oil.
are just some of the basic fundamentals to keep in mind when you are considering a trade in the heating oil market. Therefore,
before opening up a commodity account to trade heating oil you should consult with a licensed commodity broker that follows
the heating oil market to discuss investment strategies.