Learn Heating Oil

Trading

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Heating oil is refined from Crude Oil . It is a liquid petroleum product, and a commodity that is traded on the financial markets. Heating oil has widespread applications for residential heating, for furnaces, fuel oil, and boilers in tenements. Homes that don’t use natural gas typically substitute with heating oil for their energy requirements. Heating oil is abbreviated as follows: HHO

Ever since the oil burner was invented in the 1920s, heating oil gained in importance. It is cheaper than coal, and is a better prospect for indoor heating purposes. Plus, heating oil is better for the environment, and easier to work with.

 

Over the years, heating oil has become more efficient to use – it is cleaner and safer to use. Thanks to its widespread applications, heating oil is an excellent way to control temperatures via the thermostat. Typically, heating oil is delivered to homes by tank trucks for residential and commercial buildings, and it is stored in tanks.

Heating oil is an affordable energy resource, and prices have dropped significantly. In the United States, the heating oil industry is valued at over £16 billion.

The prices of Heating Oil

Multiple factors affect the price of heating oil. To guard against price volatility, heating oil producers use short hedges. These set a fixed selling price (SP) for the heating oil to be traded in contracts. The futures market for heating oil is used to determine prices for diesel and jet fuel.

Seasonal fluctuations in demand can cause volatility in prices. Heating oil prices typically rise in spring. Note that there is an inverse correlation– an opposite relationship – between the USD and commodities. Contracts are settled in USD, so when the USD moves up or down, so too does the price of commodities like heating oil. This does not alter the value of the oil, it simply indicates a different value for the USD.

In futures contracts, trades of heating oil are denominated in units of 1,000 barrels. The minimum price fluctuation is £0.0001 per gallon. Crude oil prices take the lead over gas prices. But, crude oil processing will also determine how prices move. Seasonal changes (for example the summer fuel blend) leads to higher petroleum prices.

The EPA (Environmental Protection Agency) of the US has determined that the April – June period is known as the transition season to produce fuel. Refineries across the US compensate for this between March – April. There is a different fuel blend used in summer than there is in winter.

Acts of God such as Hurricane Harvey can have a dramatic effect on the price of heating oil. Consider situations where workers are evacuated from oil platforms, or drilling rigs in the Gulf of Mexico, and production stops. This will lead to a rise in prices. Today, oil prices are more volatile than they were 10 years ago. There are many reasons for this, including supply considerations, expectations of futures traders, and tax-related issues.

Here are a few more advantages:

  • Fully automated, our automated trading systems allow you to rapidly execute recurring tasks on your trading activity. Our software generates automatic orders and then submits them to the market exchange. It’s capable of duplicating positions of proven professional traders.

  • Short Selling ,  if you believe that the price of an asset like HHO will decline, you will be able to buy the asset back at a lower price to generate a profit. The old adage: sell high – buy low – perfectly describes short selling for traders in bearish markets.

  • Leveraged trading options,  AvaTrade our rated broker  allows you to ‘borrow’ funds for investment purposes. You can now open a much bigger position with a small investment. Be advised that leverage magnifies your profits, but it can also increase your losses.

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Trading in leveraged currency contracts comes with substantial risk. You must be aware of these risks before opening an account to trade. High leverage amplifies gains as well as losses, leading to potential loss of the entire account balance. Trading in leveraged currency contracts may not be suitable for every investor. Never speculate using money that you cannot afford to lose.

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