Heating oil

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Heating oil is used to fuel furnaces within buildings. It is usually dyed to distinguish it from taxed vehicle fuel. Typically, delivery is by tanker truck to individual homes and commercial spaces, and the oil is stored in oil tanks in the basement or next to the building. Leaks in older facilities are an environmental concern.

Heating oil, also known as No. 2 fuel oil, accounts for about 25% of the yield of a barrel of crude oil, the second-largest "cut" after gasoline. The heating oil futures contract trades in units of 42,000 gallons (1,000 barrels) and is based on delivery in New York harbor, the principal cash market trading center. Options on futures, calendar spread options contracts, crack spread options contracts, and average price options contracts give market participants even greater flexibility in managing price risk.

The heating oil futures contract is also used to hedge diesel fuel and jet fuel, both of which trade in the cash market at an often stable premium to NYMEX Division New York harbor heating oil futures.


http://www.nymex.com/ho_pre_agree.aspx New York Mercantile Exchange