Can you hedge Heating Oil price rises using WisdomTree HEAT ETC?

mark_cycling00

Good morning all,

Heating Oil has dropped to about 84-88ppl at current time, but my gut feel is that prices will rise a lot at some point in Winter just when I need a top-up, perhaps through panic buying like in march this year

I have some big oil and wind-farm shares and although they have increased a bit, these aren't directly linked to heating oil prices. 
Would owning https://www.ii.co.uk/etfs/wisdomtree-heating-oil-etc/LSE:HEAT be more directly linked and serve as a hedge?

TBH I don't know what an ETC is.

thanks

dunstonh

The ETF is a very high risk and volatile fund.   It has dropped 25% in value in the last 2 months.    Say you put £100,000 in there two months ago, it would be worth £75,000 now.

In 2018 it hit a peak that did not recover until February 2022.  Conventional investments went down in 2018 as well but 2019, 2020 and 2021 were all good positive years.

It is the sort of fund you would hold in a wider portfolio and not in isolation.    Maybe allocating no more than 5% of your portfolio to it but more typically around 1-2% (with other niche/high risk funds being held with 1%-2% taking your total no higher than 5%).   This is because of its specialist nature and volatility.   You also get no FSCS protection 

mark_cycling00

Thanks, 

The scenario would be to invest my annual heating oil spending (say £2,000). Hoping that if the retail price increased then so would the ETF and I would sell the appropriate proportion when I bought oil.
If the retail price dropped I wouldn't benefit but kinda like "fixing" the price at current prices.

Saying that, the ETF doesn't quite match the retail price when I compare it to the Boiler-Juice price graph which has higher peaks.

QrizB

mark_cycling00 said:

Saying that, the ETF doesn't quite match the retail price when I compare it to the Boiler-Juice price graph which has higher peaks.

It's not entirely clear to me, from a very brief glance at the fund docs, exactly whose heating oil price index it tracks. The fact it's priced in dollars makes me wonder if it's following US prices, which won't necessarily reflect the UK market.