Like its name suggests, heating oil is almost exclusively used as a flammable, liquid petroleum product for furnaces and boilers. Heating oil is classified as a hazardous material and has consequently earned negative attention from environmentalists and state legislatures. Presently, 25% of a barrel of crude oil goes to the production of heating oil, which is the second largest cut after petrol. The amount of trading options (i.e. options on futures, calendar spread options, crack spread options, etc.) for heating oil gives traders the ability and flexibility to manage price risk.
|Heating Oil Contract Specifications|
|Contract Size||42,000 gallons|
|Price Quotation||U.S. dollars and cents per gallon|
|Trading Hours||CME Globex: Sunday – Friday 6:00 p.m. – 5:15 pm ET with a 45-minute break each day beginning at 5:15 pm ET|
|CME ClearPort: Sunday – Friday 6:00 p.m. – 5:15 pm ET with a 45-minute break each day beginning at 5:15 pm ET|
|Minimum Price Fluctuation||$0.0001 per gallon|
|Product Code||CME Globex: HO|
|CME ClearPort: HO|
|Listed Contracts||Current Year + 3 Years + 1 Month|
|Last Trade Date||Trading in a current month shall cease on the last business day of the month preceding the delivery month.|
|Trade At Marker Or Trade At Settlement Rules||Trading at settlement is available for spot (except on the last trading day), 2nd, 3rd and 4th months and subject to the existing TAS rules. Trading in all TAS products will cease daily at 2:30 PM Eastern Time. The TAS products will trade off of a “Base Price” of 0 to create a differential (plus or minus 10 ticks) versus settlement in the underlying product on a 1 to 1 basis. A trade done at the Base Price of 0 will correspond to a “traditional” TAS trade which will clear exactly at the final settlement price of the day.
TAM trading is analogous to our existing Trading at Settlement (TAS) trading wherein parties will be permitted to trade at a differential that represents a not-yet-known price. TAM trading will use a marker price, whereas TAS trading uses the Exchange-determined settlement price for the applicable contract month. As with TAS trading, parties will be able to enter TAM orders at the TAM price or at a differential between one and ten ticks higher or lower than the TAM price. Trading at marker is available for spot month on the last trading day.
NY Harbor ULSD Futures (HO) spot, 2nd and 3rd months and nearby/second month, second/third month and nearby/third month calendar spreads.
|Settlement Procedures||Heating Oil Futures Settlement Procedures|
|Exchange Rules||These contracts are listed with, and subject to, the rules and regulations of NYMEX|
|Source: CME Group|
Heating Oil Facts
Heating oil is derived directly from crude oil, and accounts for about 25% of the yield. Heating oil is primarily used for residential heating, generally in the Northeast region of the country accounting for about 70% of heating oil consumption in the U.S. Over 8 million households rely on heating oil, but the demand for this energy has decreased as households switch to another source of energy like natural gas. Refineries in the U.S. are responsible for producing 85% of distillate fuel which includes heating oil and diesel. The usage of this distillate fuel is over 3 million barrels a day in the United States, while the U.S. exports distillate fuel at an average rate of over 200 barrels per day.
Last updated September 2015
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