The Learn About Futures Insider: Heating Oil

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The Learn About Futures Insider:
Heating Oil

Primarily used as a fuel to heat residential homes, heating oil is derived from domestic refineries as well as imports from foreign countries. This flammable liquid petroleum product is often considered seasonal because of this use. The contract specifications in this report will refer to the No.2 fuel oil NYMEX futures contract.

Contract Size: 42,000 U.S. gallons

Price Quote & Tick Size: U.S. dollars and cents per gallon; minimum fluctuation is $0.0001 (0.01�) per gallon ($4.20 per contract).

Contract Months: 36 consecutive months.

Trading Specs: Open outcry trading is conducted from 9:00 AM until 2:30 PM ET. Electronic trading is conducted from 6:00 PM until 5:15 PM via the CME Globex� trading platform, Sunday through Friday. There is a 45-minute break each day between 5:15PM (current trade date) and 6:00 PM (next trade date).

Daily Price Limit: $0.25 per gallon ($10,500 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $0.25 per gallon in either direction. If another halt were triggered, the market would continue to be expanded by $0.25 per gallon in either direction after each successive five-minute trading halt. There will be no maximum price fluctuation limits during any one trading session.

Trading Symbols: HO


Past performance is not indicative of future results.
***chart courtesy of Gecko Software

Heating Oil Facts

Heating oil is usually included in the distillate fuel oil family as designated by refineries. These distillates can include diesel fuel and heating oils which is why the heating oil futures contract may be considered for use in hedging for diesel fuel and jet fuel. Fuel oil - or No 2 fuel oil - is usually the second largest resultant "cut" from a barrel of crude oil after gasoline. Delivered by tanker truck to residential and commercial buildings, fuel oil can be stored in tanks until required for boiler or forced air furnaces.

The top five consuming states are shown in the following illustration:


Distillate products from domestic sources or imports from Canada or Venezuela may be shipped all over the United States via pipelines, tankers, and rail cars. Central distribution areas (like New York Harbor) or storage terminals may hold fuel oil until redistribution. In the United States, the typical season for heating oil use is from October through March. Refiners often produce heating oil throughout the summer and fall months and store it for winter use; however, they may also refine heating oil in the winter.

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