✅ Why trade heating oil?

Heating oil trading can be a direct play on weather patterns. If you expect a colder than usual winter in the northern climates then buying heating oil might deliver good profits. Alternatively if you believe the winter will be warmer than usual a short position in heating oil could be profitable. Heating oil prices also tend to be more volatile than crude oil, which can be useful for traders. In some cases a trader may just want to try a different market.

✅ Is heating oil a better trade compared with crude oil?

Heating oil is made from crude oil so the price of heating oil tends to be correlated with crude oil to some degree. However heating oil is also more volatile as it responds to refinery capacity and weather patterns more strongly than crude oil will. This can make heating oil a good trade for those that appreciate volatility. Heating oil is also not correlated as strongly with moves in the U.S. dollar than crude oil, which can be useful if you believe the U.S. dollar is going to become considerably stronger.

✅ What is the best strategy for trading heating oil?

Because heating oil tends to see consolidation during summer months, followed by strong trends in one direction or another a breakout swing trading system is an excellent choice when trading heating oil. Basically we want a strategy that looks for prices breaking out of range-bound conditions. Bollinger Bands can work well for this type of strategy, as can oscillators. A combination of both often works best as one confirms the other. Traders may also want to pair the seasonal tendency of heating oil to look for these breakout moves.

Heating Oil Trading

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Heating Oil Trading

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

At AvaTrade UK, clients get to use sophisticated trading platforms UK like AvaTradeGO and MetaTrader 4 to trade heating oil. Here are some of the benefits you will enjoy: High trading leverage of up to

Leverage as high as
Competitive spreads on HHO
An outstanding multi-lingual customer service
Trading educational resources and rich analysis
Trade heating oil on the go with the AvaTradeGO trading mobile app
You can access a choice of trading instruments, including commodities, bonds, stock, forex trading, crypto trading, indices trading and ETFs.

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.

Understanding Trading Conditions at AvaTrade UK

Spread Fixed

Min Trade Size 1000
Leverage
Margin 2.00%
Increment: 0.001
MT4 Symbol: HEATING_OIL

Oil traders at AvaTrade UK can enjoy many benefits. These include multiple educational tools and resources, and the world’s finest trading platforms. We have a wide range of educational tools to help you become a better trader, as well as a professional customer service team. Plus, they speak 14 languages so that UK traders across Britain will always have friendly support available. Thanks to Trading Central, you get to enjoy a comprehensive selection of trading charts and graphs to make your heating oil trading easier.

Here are a few more advantages:

Fully Automated Trading, 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 UK 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.

Heating Oil Trading Main FAQs

Why trade heating oil?
Heating oil trading can be a direct play on weather patterns. If you expect a colder than usual winter in the northern climates then buying heating oil might deliver good profits. Alternatively if you believe the winter will be warmer than usual a short position in heating oil could be profitable. Heating oil prices also tend to be more volatile than crude oil, which can be useful for traders. In some cases a trader may just want to try a different market.
Is heating oil a better trade compared with crude oil?
Heating oil is made from crude oil so the price of heating oil tends to be correlated with crude oil to some degree. However heating oil is also more volatile as it responds to refinery capacity and weather patterns more strongly than crude oil will. This can make heating oil a good trade for those that appreciate volatility. Heating oil is also not correlated as strongly with moves in the U.S. dollar than crude oil, which can be useful if you believe the U.S. dollar is going to become considerably stronger.
What is the best strategy for trading heating oil?
Because heating oil tends to see consolidation during summer months, followed by strong trends in one direction or another a breakout swing trading system is an excellent choice when trading heating oil. Basically we want a strategy that looks for prices breaking out of range-bound conditions. Bollinger Bands can work well for this type of strategy, as can oscillators. A combination of both often works best as one confirms the other. Traders may also want to pair the seasonal tendency of heating oil to look for these breakout moves.

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