How to Invest in Heating Oil
Heating oil is a low-viscosity petroleum product that is derived from crude oil. As a result, heating oil prices are often tied to WTI crude. Generally, 25% of the yield of a barrel of crude is devoted to heating oil, the second most after gasoline.
Heating oil is generally used as a fuel for furnaces or boilers to heat homes and businesses. The fuel is especially popular in parts in of Northeastern U.S. where natural gas and propane are either inaccessible or too expensive for these often cold markets. The product is also popular in the British Isles and especially Northern Ireland. Furthermore, contracts of the fuel are a popular choice for those seeking to hedge prices of diesel and jet fuel which do not trade as liquidly as heating oil does but are often a stable premium above NYMEX heating oil futures contracts.
For those looking to invest directly in heating oil, a limited number of options are available. While there are heavily traded futures contracts for the product, there are currently no pure play stocks or equity ETFs that invest in companies that exclusively produce heating oil and do not also refine it themselves from crude oil. With that being said, some smaller firms or even some utilities may be a way to gain some level of exposure to the sector. There are, however, a number of ETPs that offer exposure to the commodity\'s futures contracts either in a basket or pure-play form.