Heating oil is a refined petroleum product used primarily for residential and commercial heating, particularly in the northeastern United States. Chemically similar to diesel fuel, heating oil is traded as futures contracts on NYMEX and serves as a benchmark for distillate products. Heating oil demand is highly seasonal, peaking during winter months in cold climates.

Heating oil prices are influenced by crude oil costs, refinery capacity, weather patterns, inventory levels, and competition from natural gas heating systems. The product’s seasonal demand patterns create predictable trading opportunities, while weather forecasts and energy policy changes can cause significant price volatility. Heating oil crack spreads measure refining profitability for this distillate product.

Real-world example: An unusually cold winter forecast causes heating oil futures to rally from $2.20 to $2.80 per gallon as traders anticipate increased demand and potential supply shortages in northeastern U.S. markets.