heating oil contract - $2.30/gallon - up or down?

[keith]

My heating oil supplier is offering a 6 month contract locking the price to $2.30/gallon (except in case of force majeure).

Anyone got any insights into the price of heating oil this winter? Heating oil reserves are currently very high, but so is the price. This is one commodity whose price doesn't track well with supply and demand.

 

[pepper32]

Read the December 19th issue of US News and World Report. It has an indepth article on this years heating fuel situation.

 

[GROUCHO MARX]

It doesn't have to be either/or. You can hedge on a portion of your expected use.

 

[Shannow]

quote:

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This is one commodity whose price doesn't track well with supply and demand.

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From what I've been lead to believe, that's an incorrect statment, as ALL products follow market forces.

 

[keith]

quote:

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From what I've been lead to believe, that's an incorrect statment, as ALL products follow market forces

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Alrighty then, which market forces?

Supply - plentiful, more heating oil reserves than last year.
Demand - 'bout the same as every winter.
Prices - very high! (even though crude prices have come way down).

Last years heating oil contract was $1.50/gallon. This years offering - $2.30/gallon. Hmmmm.

Thanks for the pointer to US News and World Report. I'll find a copy and read that, maybe some good insight in there.

 

[Al]

Futures are up a few cents in the next few months, but so what. All that means is that half the people setting those prices (speculators) will make money at that price and the other half will loose. Flip a coin and go with it.

Anyone who knows the answer to that question will be hiring Bill Gates to fix their computer.

 

[Pablo]

On Thursday NG supplies tightened greatly. Tiny price increase. To me this is a bearish price sign. But yes on Monday, this and about $5 will get you a coffee.

 

[GROUCHO MARX]

In that no one knows what prices WILL do, you hedge.

This way, you've eliminated the worst decision and the best decision.

 

[vairox]

high supply, low demand, high price.... = greed....

 

[satterfi]

Futures for heating oil are flat for the next six months.

I'd pass on a contract and bet prices come down.

 

[Pablo]

A contract right now? Seems not right.

Look what NG futures did on Thursday/Friday.

 

[Schmoe]

I wouldn't buy into a contract at the height of the demand time.

 

[The_Jeff]

It would seem more prudent to install another tank in the basement so you could buy at spot cash prices and float through the roughest month. Then if we get "force majeure" you won't be left in the cold as quickly.

I'd rather heat with #2 oil than gas now, as gas powered electric generating plants are competing with home heat for the same resource.

Last summer was wierd; I watched the price the whole time as I like to make a big tank-filling buy around July and it never dipped.

 

[GROUCHO MARX]

What's the spot price today?

I'm seeing $2.43 a gallon.

 

[rjundi]

$2.18 in my parts of Seacoast Nh.

 

[The_Jeff]

$2.019 today from http://www.yorkieoil.com in southern Maine. IDK if our South Portland terminal (direct off the tanker) services NH though rjundi. Naturally ground transportation is expensive.

 

[Audity]

I work with a guy whose profession involves futures and hedging in electricity and fuel (oil and natural gas). The complexity of what he does, to the extent I've been able to figure it out, just makes me realize I can't make those decisions for myself in an informed way.

Maybe there's some comfort in knowing that your fuel dealer probably knows a lot more about it than we do, and he has used his expertise to buy his supply forward. He's added a profit margin to it, hopefully competitive, and put it out there.

However, hedging is a form of insurance, and the rates include overhead and profit for the seller. I believe if you can survive the times when the prices are up, you'll almost certainly save money on the long haul by not hedging.