Heating oil is a distillate fuel used for domestic heating and, in moderate capacity, in industrial burner units. Like gasoline and diesel, heating oil consumption or demand trends matter to refineries.
Higher demand for the fuel means bullish prices, which are a positive for refineries such as Valero (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 they make up ~9% of the ETF.
Last week, as of March 23, residential heating oil prices averaged ~$2.93 per gallon—~11 cents per gallon lower than the week before.
Heating oil prices are linked to crude oil prices. As crude oil prices began to fall late last year, so did heating oil prices. Market Realist’s weekly crude inventory and price series, which you can find on our Energy and Power page, covers weekly changes in distillate inventories, which heating oil is a component of.
Lower crude oil price forecasts have also resulted in lower projected residential heating oil prices. The EIA expects retail heating oil prices to average $3.02 per gallon this winter—$0.86 per gallon less than they averaged last winter. The average household is expected to spend $1,784 on heating this winter. This is $570 lower than last winter.