Heating Oil (HO)

A critical fuel for Northeastern U.S. home heating and a proxy for diesel fuel prices.

2-Minute Beginner Summary

Heating oil is diesel fuel used to heat homes, particularly in the Northeastern U.S. Prices spike during cold winters and track crude oil prices. The heating oil futures contract also serves as a proxy for diesel fuel, which powers trucks and trains. Winter weather forecasts can move prices dramatically.

What Is Heating Oil?

Heating oil is a refined petroleum product similar to diesel fuel. It's primarily used for space heating in regions with cold winters and limited natural gas infrastructure.

Why HO Matters

About 5.5 million U.S. households rely on heating oil, mostly in the Northeast. Diesel fuel prices (trucking, shipping) closely follow heating oil.

What Moves the Price?

Top 6 drivers affecting Heating Oil prices:

Winter Weather

Cold temperatures in the Northeast are the primary demand driver.

Crude Oil Prices

Heating oil is refined from crude, so oil prices set the baseline.

Diesel Demand

Trucking and shipping demand affects heating oil/diesel prices year-round.

Refinery Output

Refiners can shift between gasoline and distillates based on margins.

Import Availability

Northeast imports distillates from Europe when domestic supply is tight.

SPR Releases

Government releases from heating oil reserves can temper price spikes.

Market Structure

Spot vs Futures

Heating oil trades as Ultra Low Sulfur Diesel (ULSD) futures on NYMEX. Physical prices vary by region.

Contango & Backwardation

Strongly seasonal curve—winter months command premiums. Can flip to steep backwardation during cold snaps.

Key Exchanges: NYMEX (CME Group)

Contract Size: 42,000 gallons (1,000 barrels) per contract

Seasonality

Heating oil is highly seasonal with winter premiums.

Peak Months: November, December, January, February

Low Months: June, July, August, September

Prices build through fall as storage fills for winter. Peak during coldest months. Spring thaw brings relief. Summer is typically weakest.

Macro Sensitivity

Heating oil follows crude oil's macro sensitivities. Diesel demand component ties it to freight activity and economic growth.

USD Sensitivity: negative
Inflation Sensitivity: positive
Growth Sensitivity: positive
Rates Sensitivity: neutral

Stock & ETF Exposure Map

Related Stocks

Related ETFs

Key Calendar & Reports

EIA Weekly Petroleum Report (Weekly (Wednesday))

Source: EIA. Distillate fuel inventories and demand

NOAA Winter Outlook (Seasonal)

Source: NOAA. Long-range temperature forecasts

Northeast Heating Oil Reserve Report (As needed)

Source: DOE. Emergency reserve levels

How to Trade Heating Oil

Trade futures on NYMEX or invest in refining stocks. Heating oil is less liquid than crude or gasoline but offers seasonal opportunities.

Frequently Asked Questions

Is heating oil the same as diesel?

Chemically nearly identical. The main difference is taxes and dyes. Road diesel is taxed higher and has different additives.

Why is heating oil mostly used in the Northeast?

Historical infrastructure. The region developed before natural gas pipelines and still has limited gas capacity to older homes.

How do I hedge heating bills?

Lock in prices with your supplier, or for larger consumers, use NYMEX futures or options to hedge winter costs.

What is the heating oil reserve?

A Northeast Home Heating Oil Reserve of 1 million barrels that can be released during supply emergencies.

Why did heating oil prices spike in 2022?

Russia sanctions disrupted global diesel supply, refinery capacity was tight, and cold weather hit simultaneously.

Can I switch from heating oil to natural gas?

Yes, but conversion costs $5,000-15,000 and requires gas line access. Many do it for long-term savings.

How is heating oil delivered?

Trucks deliver to home tanks (usually 275 gallons). Many homes have automatic delivery based on degree-day calculations.

What is Bioheat?

A blend of heating oil with biodiesel (up to 20%). It burns cleaner and is increasingly mandated in some states.

Glossary

ULSD: Ultra Low Sulfur Diesel - the modern standard with <15 ppm sulfur content.
Distillate: Refined products in the middle of the barrel: diesel, heating oil, jet fuel.
Degree Days: Measure of heating/cooling demand based on temperature departure from 65°F.
K-1 Kerosene: Lighter distillate used in portable heaters and mixed with heating oil in extreme cold.
Cetane: Diesel ignition quality measure, similar to octane for gasoline.
Bioheat: Heating oil blended with biodiesel from vegetable oils or animal fats.
Polar Vortex: Arctic air mass that can bring extreme cold to the Northeast, spiking demand.
Rack Price: Wholesale terminal price before delivery costs and taxes.
Will-Call: Ordering heating oil yourself vs. automatic delivery.
Tank Gauge: Device showing heating oil level in the storage tank.