Heating Oil
A distillate fuel oil used for space heating and as a diesel proxy, traded on NYMEX in $/gallon and a key component of crack spread calculations.
Heating oil (also called No. 2 fuel oil or distillate fuel oil) trades on NYMEX in 42,000-gallon contracts (1,000 barrels). It is chemically similar to diesel fuel and is used interchangeably with diesel in the futures market for hedging purposes.
Heating oil demand peaks in winter in the US Northeast and Europe, creating strong seasonal patterns. Prices track crude oil closely but diverge based on refinery margins and regional distillate inventory levels. A tight distillate supply can push the diesel crack spread significantly above average.
As a key input to the 3-2-1 crack spread calculation, heating oil futures are widely used by refiners to hedge their output margin.
Example
Heating oil futures trade at $2.92/gallon. At 42,000 gallons per contract, one NYMEX HO contract has a notional value of $122,640. A one-cent/gallon move generates $420 per contract.
Related Terms
Energy Complex
The collective term for energy-related commodities — crude oil, natural gas, refined products (gasoline, heating oil, diesel) — and the markets and instruments around them.
BeginnerRBOB Gasoline
Reformulated Blendstock for Oxygenate Blending — the US benchmark unleaded gasoline futures contract traded on NYMEX in $/gallon.
IntermediateSeasonality
Recurring, calendar-driven price patterns in commodities caused by predictable cycles in supply (harvest) and demand (weather-driven consumption).
IntermediateWTI Crude
West Texas Intermediate crude oil — the US benchmark grade traded on NYMEX, priced in $/barrel and settled at Cushing, Oklahoma.
Beginner