Buying Heating Oil Put Options to Profit from a Fall in Heating Oil Prices

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Heating Oil Futures – May 20 (HOK0)

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* New infections outside China exceeds those inside * U.S. crude stocks rise, gasoline inventories drop -EIA * Oil price drop may spur OPEC+ to act -analyst * OPEC+ due to meet.

By David Ljunggren OTTAWA (Reuters) – Canada’s Liberal government said on Friday it was deeply concerned about protests by aboriginal activists that are blocking some key.

By David Ljunggren OTTAWA (Reuters) – Canada’s Liberal government said on Friday it was deeply concerned about protests by aboriginal activists that are blocking some key.

Heating Oil Futures Analysis

Is the first U.S. gasoline build in eight weeks looming? At least one veteran watcher of the energy space seems to think so.Dominick Chirichella, who has tracked the oil and gas.

If there’s one season in the calendar that oil bulls wish would just go away, it must be the season for refinery maintenance. Refiners typically shutter their plants during.

Oil futures fell Friday, but the U.S. benchmark remains on track for a more-than-3% weekly rise after a large fall in U.S. inventories and some cautious optimism on trade. West.

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Getting the best heating oil prices

By Sarah Ingrams

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Getting the best heating oil prices

Learn more about factors that affect heating oil prices and why they fluctuate. Plus follow our top tips to help you get the best price for your heating oil.

Heating oil prices are subject to change, depending on a number of factors. But you can still save money – if you know how.

Prices for heating oil, including sudden peaks and troughs, are largely affected by the price of crude oil. This can fluctuate depending on the weather, political unrest and global production.

Local weather can affect the demand for heating oil, which in turn affects the price. This includes prices for delivery, too, depending on how far you are from a supplier.

How much does a litre of heating oil cost?

The average price per litre for kerosene was around 51p in January 2020* – higher than at the same time in 2020, when it was 48p, but lower than in October 2020, when it was 54p.

Are heating oil prices going up?

The average price for heating oil in January 2020 is down 2% on the same time the year before. But when compared with January 2020, it’s up 59%.

But this doesn’t necessarily mean that prices are going to continue to increase. The price fell between January and April in two of the last four years.

No matter what happens to the price of heating oil, there are still various things you can do to keep the costs down. Read on to discover the best time to buy heating oil, and what you can do to make sure you get the best price.

Make sure you’re not paying more for electricity than you should. Use our independent switching site, Which? Switch, to compare electricity prices.

Compare heating oil prices

Heating oil prices vary across the UK and between companies. So compare as many quotes as possible from different companies, and do so regularly so you can monitor when and where you can get the best prices.

You can get free estimates from online companies, such as Boiler Juice and Heating Oil. But these types of firm provide only guide prices; for precise figures it’s best to check with as many local and online companies as possible once you’ve decided to buy.

You can use the UK and Ireland Fuel Distributors Association (UKIFDA) directory to find suppliers in your area. UKIFDA, which provides consumer information about heating oil, is the trade association for liquid fuel distributors.

It’s a good idea to do a quick online search for reviews or complaints about a company before you buy.

If you’re buying on the internet, look out for sites with premium SSL certificates (the small padlock icon in the top corner of your website bar, next to the web address, like in the image below). As these cost money, they’re less likely to be used by a fraudster. Plus it means the site’s secure.

If you’re not sure about a supplier, contact the UKIFDA at [email protected] It’s also worth looking for suppliers with FPS accreditation, as this means they will have had to sign up to its code of practice.

Buy ahead of time

Where possible, try to plan and buy ahead to save yourself from paying more. The prices quoted to us are for standard deliveries. If you need it more quickly, express or emergency deliveries are often available, but at a premium price.

If you can plan ahead, waiting longer will cost you less.

Buy heating oil in summer

Prices for heating oil tend to be lower in the summer, as demand is a lot lower. For example, the average price for heating oil dropped from 43p a litre in April 2020 to 38p in July. In 2020, prices fluctuated little but were at their cheapest in April.

However, it’s wise to keep an eye on the market in general, as it’s not always cheaper in summer, and can fluctuate. For example, in 2020 it was cheaper in winter than in spring and summer:

  • 48p in January 2020
  • 52p in April and July 2020

Buying outside of the winter season means you will avoid potential delivery problems in bad weather. On average, people buy around two or three times a year – depending on the size of their tank and energy use – and order between 1,000 and 2,000 litres.

Don’t let your tank get too low before you order, especially in winter.

No matter when you order, it’s important to keep an eye on your oil-tank gauge. Don’t let it get too low before you order – less than a quarter full, for example – especially in winter.

Bulk buy heating oil

The size of your tank will affect how much heating oil you can store, and therefore how much you can order in one go. Generally speaking, the more you order, the cheaper it will be. The average size of domestic heating oil tanks ranges between 1,000 and 3,500 litres (although larger ones are used commercially).

It’s worth noting that a heating oil tank should only be filled up to around 80-90% of its capacity to avoid spillage.

If your tank doesn’t have a large capacity, joining a heating oil club (also called a heating oil buying group) free of charge is a good way to buy cheaper heating oil. This is because your order will be clubbed together with others in your area.

The Citizens Advice Bureau estimates that buying this way can knock 10% off your heating oil bills.

Besides searching online for heating oil clubs in your area, it’s also worth looking at websites that combine regional oil clubs together to increase orders even further, such as The Oil-Club.

Alternatively, you could start your own oil club with neighbours, friends and family. But bear in mind how close together you live, and whether the volume you wish to order is likely to exceed what a lorry can carry (18-20,000 litres). Above this, you’re less likely to get a further discount, as the supplier will need a second vehicle. You’ll need to appoint a co-ordinator to call the oil companies and negotiate a price depending on the size of the group and time of year you order. You can use local services, such as the post office, village hall, or local social media sites, to advertise for more members.

One thing to remember about bulk buying, though, is that the more you order, the more you have to lose if it’s stolen. To find out how to protect your tank against theft, see the section on heating oil tanks.

Negotiate the price

Whether buying in bulk with a club or on your own, don’t be afraid to negotiate. The more quotes you have, the more information you will have to bargain with.

Even if you’re happy with your current supplier, see if you can find a cheaper price – then talk to your usual supplier, as it may be able to match it.

Be careful how you pay

When you set up payment for your heating oil, check carefully for the following:

  • Does the company charge extra fees for paying by credit card?
  • Will paying by direct debit can lock you into a contract?

A contract isn’t necessarily a bad thing; in some agreements the supplier will also monitor the amount of heating oil in your tank and automatically arrange to top it up.

On the other hand, being locked into a contract doesn’t give you the flexibility to shop around for a better price.

Consider both of these when deciding how to pay for your heating oil.

Protect and maintain your tank

Heating oil is pricey, so safeguarding it against theft and leakage can save you money in the long run.

Servicing your heating oil tank and boiler once a year using an Oftec-registered technician will alert you to problems before they get worse, and will protect against more costly faults.

There are several things you can do to check for damage and protect against theft. See the section on heating oil tanks.

Get an efficient oil boiler

The efficiency and age of your boiler will affect how much money you spend, so make sure it’s in working order by getting it serviced annually. If you have a very old or inefficient model, getting an upgrade may save you money in the long run.

According to oil industry advice, you could save £200 a year if you change to a modern condensing boiler that has up to 97% efficiency, compared with a model that’s more than six years old. But a new oil boiler will cost anywhere between around £1,300 and £3,200, and then between £2,000 and £3,000 for installation.

Before you get a new boiler, you need to know which brands are the most reliable. We reveal the best oil boiler brands, and see our advice on getting the best boiler installation.

Cut your energy bills

As well as getting a good price for heating oil, you can minimise the amount you use (and therefore the money you spend) by cutting your energy costs. Take a look at our full guide on how to save on your energy bill. Options include:

(*Average prices for a litre of kerosene from Sutherland Tables, which collects domestic fuel pricing data from across the UK for each quarter of the year. For example, January figures are an average across November, December and January.)

Who benefits from lower oil prices?

Lower fuel prices are great for the consumer, but we know that not all of the cost saving of lower crude oil and gas prices have been passed on to the general public. Oil and gas refiners prosper from lower oil prices. Like the rest of the oil industry, refiners’ revenues are down, but their profit margins are up significantly.
Refiners are using lower crude prices to widen their cut of the pump price of oil. In other words, the lower price of oil is not entirely passed down to consumers at the pump, instead the difference is enabling refiners to increase their profits.

Price Falls

Crude oil prices have been plummeting since June 2020. The initial fall was rapid and unexpected. This was because production grew faster than projections and demand deteriorated faster than expected, resulting in an excess of oil for sale in the world. Periodic rumor-fuelled rallies in the market since June 2020 have proved to be the result of wishful thinking. Recent events, such as the fall in Chinese growth projections and the end of sanctions against Iran, have given economists reason to downgrade their expectations for crude oil prices.

The lurches in the consensus of opinion for demand for oil over the past year have caused temporary opportunities for price rises at the gas pump. The retail gas industry tends to raise prices quickly when crude prices rise and drop prices slowly when crude prices fall. This variable speed of price movements has given the refineries and the gas stations opportunities to extend their profit margins.

The fall in the price of crude oil from June 2020 to June 2020 was around $80 per barrel. This shaved $1.60 off the cost of a gallon of gasoline. However, the pump price only fell by $1.20 during that period.

The Losers

High prices for crude oil from 2020 to 2020 gave great incentives to US explorers to invest in locating new sources of oil and gas. The practice of hydraulic fracturing rapidly expanded the USA’s oil production and contributed to the current glut. High sales prices meant that fracking companies could bowl into town, rich with easy money. They sprayed money around the communities they moved into and offered high prices for mineral rights and site access. Those gold rush bonanza days ended in June 2020. The price fall in crude oil did not squeeze frackers out of business, they caused them to be a lot more careful with their money.

Frackers learned to extract more oil from each rig, thus reducing the start up overhead costs of each well. The increased tightness of financing meant the idea of spending millions to get access and buy friends was off the table. A lot of the largesse of fracking has been wiped off the books and so local communities in the vicinity of fracking plays benefit a lot less from a new well, than those lucky citizens reaped back in 2020 and 2020.

Fewer rigs mean fewer workers. It also means that less equipment needs to be sold. Thus, oil service companies make fewer sales, and also require fewer employees to maintain their reduced output. Employment in the oil industry has suffered as plans get put off and exploration is cut back. As examples of this phenomenon, consider Schlumberger, which is the largest oilfield service company in the world. Schlumberger has cut its workforce by 9,000 this year. Weatherford International cut their payroll from 60,000 staff to 46,000 in 2020 and then made a further 5,000 employees redundant in 2020.

By squeezing margins and employing new technology, US frackers have been able to stay in the game. Their success at maintaining profitability at lower market prices has put pressure on conventional producers around the world to reduce profits and slash costs. So, although no producers have gone bust yet, their drive to survive has returned a lot of oil workers to the employment lines.

Unemployment reduces the wages of employed oil workers, because there are plenty of other who would fill the shoes of specialists who walk off site rather than reducing their fees. Thus, the oil industry’s workforce has become a major loser in the low crude price era.

Middle Eastern OPEC members are said to be driving the price fall in order to squeeze out their fracking rivals. This strategy has lost those governments the income they need to keep their economies running with very little alternative sources of income. They must now subsidize their governments with their foreign currency reserves. Drawing down bank deposits means there is less money available for banks to lend, thus squeezing credit and reducing global economic expansion further.

As Arabian governments start to draw down their savings, they will be forced to cut government spending. Oil producers in the Middle East buy off their citizens’ ambitions for democracy with petrodollars. Of course when the money runs out, instability will increase even further in those countries.

The Winners

The recorded fall in the gas pump price of $1.20 per gallon is a definite benefit to the American consumer. Under normal circumstances, economists would expect this saving to boost spending on consumer goods. However, this time around, people don’t seem to be spending their gas savings on buying larger gas guzzling vehicles. This may be because the trend towards energy efficiency is finally starting to lodge in the American psyche. Recent memory of economic uncertainty also seems to have made the average American nervous about spending.

An increasing fraction of American consumers has decided to pocket that saving and pay down debt, rather than splurging on household gadgets or luxury vacations. Therefore, families will also be long-term winners from the crude price fall. Parents now rate financial security over comfort spending.

By far, refiners have been the biggest winners of the crude oil price downturn. This position is reflected in the stock valuations of refining companies. The stock price of the refiners, Valero Energy went from $43.76 per share in November 2020 to $70.43 in August 2020. This rise was mainly due to the company’s surge in profits. In June 2020 the business reported a profit margin of 1.68 per cent. By June 2020, that figure had risen to 5.38 per cent. Refiner Tesoro Corporation has risen in value from $56.20 in June 2020 to $102.08 in August 2020.

As an illustration of the increased margins the refiners experienced, figures from Total S.A. show a margin of $3.75 per barrel in the final quarter of that year. Profitability took off through 2020 and the company reported its refining margins at $6.73 in the first quarter and $7.36 in the second quarter.

The oil price fall was a symptom of an excess of production. As wells kept pumping oil into a saturated market, stockholdings rose. This resulted in a shortage of storage capacity, and so the price of storage rocketed. Storage fees rose from 20 cents per barrel to 80 cents by March 2020. The shares in Vopak NV, an oil storage provider, rose by 33 per cent between August 2020 and April 2020. Kinder Morgan rose by a similar margin and rival storage companies also rose in value over the same period.

Is this Profiteering?

There are laws in place to protect against profiteering. These laws prevent gas stations from overcharging for gas during crises and natural disasters, such as tornadoes. Shouldn’t they be applied? By definition, a business can be accused of profiteering when it raises prices during awar or emergency. Although the current oil price is a matter of global economic importance, it cannot be defined as a crisis or an emergency.

In fact the pump price for gasoline is slightly cheaper than it used to be a year ago so the prices were not even raised. This is called capitalism, not profiteering and is central to a free market economy. This is the American way. If you too want to benefit from this situation you can — buy refiner or oil storage stocks.


Profit derives from the gap between what it costs to produce something and what someone is prepared to pay for that product. No one considers himself a charlatan if he sells his home for more than he paid for it. That profit probably came from nothing more than the increase in the amount that buyers were prepared to pay and not from any decoration or maintenance work performed by the seller.

Demand for gasoline is inelastic, but supply levels can vary widely. Shortages of crude oil cause the price of crude oil to rise and excess production causes the price to fall. Thus, in the current market, refineries can force the price of their raw materials down and they do not lose sales by maintaining sale price levels. The crude oil market is currently in oversupply, but the automotive user can’t profit fully from that price-depressing factor, because they can’t pump crude oil into their vehicles. This is the classic formula for profit.

The intermediary sectors of the oil industry – transport refining and tanking – usually profit most during a crude oil price downturn. This is a common pattern noted by economists. As the gatekeepers to the consumer market, this sector gains power when producers need to compete to sell, and thus they are able to force down their input costs.

Logistics companies usually integrate the functions of refining, transport and storage, because that gives them a win-win situation. Producers that are prepared to drop their prices will sell their output to the refiners, who then have lower costs. Those that hold out for better prices need storage, thus the tanking divisions of the logistics companies can raise their prices thanks to excess demand for their services.

Oil production is slow to turn around. An oil well takes years to plan and established shipping agreements are hard to break. Over time, producers will reduce their output and put more effort into finding other regions in the world where they can send their crude oil. These activities will eventually bring supply and demand for crude oil back into equilibrium.

Although demand for gasoline is fairly fixed, long-term changes in the fuel market will eventually have an effect there too. The cost of different types of fuel is a major factor when families and businesses decide to purchase vehicles and heating systems. An enduring lower oil price will eventually increase demand for the product as furnaces, trucks, buses and cars get replaced. Higher demand for gasoline puts pressure on logistics companies to source more crude oil, which returns some power to the crude oil producers and reduces the negotiating power of refineries. Similarly, when demand rises against falling availability, the need for storage falls and logistics companies have to start pricing their services competitively in order to maintain throughput in their high-cost facilities.

The share prices of tanking giants Vopak NV and Kinder Morgan peaked in April 2020 and then started to fall. The excess profits to be made from storage already seem to be petering out. The end of the imbalance in the oil sector seems to be within view for stock investors, so margin gains of the logistics companies will now start to decline.


Different oil price conditions generate larger profits at different points in the supply chain. This year, and for at least another year to come, the processors, transporters and retailers have their turn to ramp up their share of the sales price. In other years, oil brokers make all the money and at other times oil producers can name their price. No matter which particular stakeholder has a periodic opportunity to profit, there is one organization that will always profit from crude oil and gasoline – the government.

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