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What Do Changes in Heating Oil Prices Mean?

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Nov. 20 2020, Updated 10:54 a.m. ET

Heating oil

Heating oil is a distillate fuel used for domestic heating and in industrial burner units in moderate capacity. Like gasoline and diesel, heating oil consumption or demand trends are of consequence to refineries.

Market Realist’s weekly crude inventory and price series, which you can find on the Energy and Power page, also covers weekly changes in distillate inventories.

A higher demand for the fuel means bullish prices, which is a positive for refineries such as Valero Energy (VLO), Marathon Petroleum (MPC), Tesoro (TSO), and Phillips 66 (PSX). All of these companies are components of the Energy Select Sector SPDR ETF (XLE) and make up ~9% of the fund.

As of March 16, residential heating oil prices averaged ~$3.03 per gallon, which was $0.18 per gallon lower than last week and $1.09 per gallon lower than the price for the corresponding week last year.

Heating oil prices are linked to crude prices. As crude prices began to fall late last year, so did heating oil prices.

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EIA’s forecasts

Lower crude price forecasts have resulted in lower projected residential heating oil prices. The EIA expects retail heating oil prices to average $3.02 per gallon this winter, which is $0.86 per gallon lower than last year. An average household is expected to spend $1,784 for heating purposes this winter. This is $570 lower than last winter.

Take a look at Market Realist’s analysis of recent commodity prices and their effects on energy companies by checking out our Energy and Power page.

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