Heating Oil Trades at Record High

Current forecasts call for a continuation of warm weather for the remainder of October and the expectation of a colder winter than last year. While the weather outside this week was anything but frightful, whether the winter will actually bring flurries, blizzards or both is anything but predictable. As we evaluate energy solutions that address this winter and the next, a famous saying from Ralph Waldo Emerson comes to mind: “we all become experts in geology the morning after the earthquake.”

Last week, the leading index for crude oil traded above $90 per barrel for the first time in history. This week, crude oil traded off during the first half of the week and has rebounded following inventory reports from the U.S. Department of Energy (DOE) which surprisingly decreased by 5.3 million barrels. While domestic refinery production fell by 0.20%, the most significant reduction was due to a drop in imports of 1.3 million barrels per day.

As a result, contracts for heating oil are trading at record high levels—up more than 40% since the start of the year. According to the DOE, consumers in the Northeast who rely on heating oil to fuel their furnaces will spend an average of $1,785 during the winter season versus $891 for households that rely on natural gas. MXenergy offers fixed price agreements so that natural gas and electricity customers can limit their exposure to monthly price fluctuations and the kind the volatility recently experienced in the heating oil market. Natural gas prices are low compared to crude oil and refined products such as heating oil. Now is a good time to take a hard look at your budget and consider fixing your price. Don’t fall victim to what, T. Boone Pickens, the legendary Texas oil and gas businessman calls the ready-aim-aim-aim-aim syndrome.

Ample supplies of natural gas in storage and the absence of a Gulf Coast hurricane have kept natural gas prices at bay. Thus far this year, the highest recorded contract settlement for Gulf Coast natural gas was $7.59 per MMBTU and occurred in June. In the prior year, the June contract for Gulf Coast natural gas closed significantly lower at $5.92 per MMBTU. Even during a year surrounded by the best of circumstances it only takes a ripple of expectation regarding a tropical storm or a global conflict to have a meaningful impact on prices.

In the absence of new information, it is likely that the November Gulf Coast natural gas contract will settle on Monday at a level below the June peak. If this scenario plays out, it will mark the fifth time since 1990 that the June contract settlement exceeded that of November. For many of us who use natural gas to heat our homes and facilities this is a nice break in prices when we need it most. With natural gas bills expected to be almost half those of home heating oil bills, we are committed to keeping our customers informed and providing the energy products that help keep costs in check.

Have a great weekend and enjoy the weather.