Best price for heating oil?

home-heating-oil

Lotus-eater wrote: »

I'm not sure about that at all. The price from BJ has now shot up by 3.5ppl and that's just today.
I suspect they hadn't updated their systems this morning, although the world oil prices also shooting up, might have something to do with it.

It looks like we might be on for another rollercoaster of oil prices for a while then, which is why I rushed to sort mine out this morning.

Mind you I could be wrong.

Looking at the numbers the market is still holding back. Based on the info we have, the retail price for heating oil is circa 24% above Brent crude prices. The chart shows 4 key elements: The bottom line is the Brent crude price in pence per litre (ppl), the greeny/blue line is the target price in ppl, the green line is the cheapest daily quote we get and the red line is the highest quote we get.

So as you can see the increased crude price has not yet fully hit the "target price".. But looking back at December it is a very different story!

Lotus-eater

So you are saying the heating oil price is lower than it really should be?

home-heating-oil

Lotus-eater wrote: »

So you are saying the heating oil price is lower than it really should be?

Well spotted to err is human as you say! I used the wrong exchange rate the new chart below is using an average exchange of 1.55. The low quotes are now tracking more or less spot on.

bernithebiker

The price of heating oil is not rigidly linked to that of crude. The difference in the two is called the 'crack', and varies enormously, according to global demand for it. This crack is actively traded in the oil markets, as is the gasoline crack. Refiners use it to hedge margins when the cracks are high.

When gasoline demand is very strong (usually in the summer, US driving season), and gasoline cracks are high (and above heating oil cracks), refiners will switch to maximising gasoline production at the expense of distillates (heating, diesel, jet, kerosene).

History dictates (for reasons of viscosity) that the UK uses a kerosene blend for heating oil, whereas most of the rest of the world uses low grade diesel. So the UK prices, albeit linked to the heat crack, have an important component of Jet prices in them. Jet A1 for aviation is simply a carefully refined kerosene.

home-heating-oil

Thanks be interested to know more about that i.e. what are the actual variations +/-% over the crude price. The number I am using is an overall percentage based on a detailed set of accounts. The important thing is to have a handle on what the prices are doing and why. Within that 24% the actual profit margin varies between 6% and 10%. 80% of the cost is the finished "cracked" product hence the hedging is built into the 4% but as you can see retail pricing varies dramatically according to demand. Our target price is quite a thick band showing a range of pricing. But other factors such as interest changes vary too. However, the value to us "consumers" is having a bench mark to use as a guide. At the end of the day the more we know and the more the heating oil co's know we know the less variation we should see over time. Got to start somewhere.

bernithebiker

The theoretical minimum crack is zero, i.e. the refiners make nothing from distilling the heating oil from the crude. But I have seen it go negative, in which case refiners can slow down or stop the whole refinery unless the other cracks (gasoline, fuel oil, etc). are very good.

It can also go very high when demand (or fear of demand) peaks, like in the Gulf War.

The important thing to bear in mind is that we are in a global marketplace. Loose cargoes of heating oil go to the highest bidder, be it China, US, wherever. So if you strip out taxes, you should be left with more or less the same heating oil price worldwide, give or take a bit for extra transport.

Also, this is the key demand sector - heating oil, diesel, and kerosene (Jet A1). Demand is very strong for all 3, and there is overlap in the specifications of them as they all 3 come from more or less the same pool. If kero prices are strong, refiners force more light diesel into it. If heatoil prices are strong, they drop the heavy diesel into it.

As a rough guide heating oil (Euro type spec) has a density of about 845 to 860 (water is 1000), diesel is 815 to 845, and kero is 790 to 815.

Next down is naphtha, 730 to 780 the main component of gasoline and the petrochemical feedstock (plastics).

Interestingly, UK heating oil being a kero blend, is overspecced for most people. It comes from when AGA's etc. had very thin bore feed pipes and needed a low viscosity fuel - kero. Unless you have such a boiler, the kero is wasted and you could be getting by fine with normal low grade diesel. I would be interested to see a current UK heating oil specification sheet if anyone has one.

bernithebiker

If you want to follow the international price of heating oil, it is far better to use the IP Gasoil contract. You are looking at the IP Brent Crude contract. If you find a site giving the IP's prices, you will find the gasoil contract. Gasoil is heating oil.

The gasoil contract price is for a barge of 1000 tonnes delivered CIF Rotterdam, so gives a good idea of what you would pay for a cargo of 10 000t + delivered into the Thames or similar.

Gasoil - Brent = Gasoil or Heating oil Crack. (You have to convert them first though as Brent is in barrels and Gasoil in tonnes).

There is the same kind of contract on the NYMEX in the USA. The crude is called WTI, and the gasoil, Number 2 Heating Oil (expressed in cents/gallon).

lucasmum

Hi, I know its a few days old but I have used Moorland Fuels in Okehmpton, Devon - my postcode is EX18- I paid 53.9ppl when buying 500l which was the best by far. This is the 2nd time I have used them and they are always very helpful. I rang up last friday to order and they delivered monday morning! I didn't ask for quick delivery or anything so I was very impressed.

benood

bernithebiker wrote: »

If you want to follow the international price of heating oil, it is far better to use the IP Gasoil contract. You are looking at the IP Brent Crude contract. If you find a site giving the IP's prices, you will find the gasoil contract. Gasoil is heating oil.

The gasoil contract price is for a barge of 1000 tonnes delivered CIF Rotterdam, so gives a good idea of what you would pay for a cargo of 10 000t + delivered into the Thames or similar.

Gasoil - Brent = Gasoil or Heating oil Crack. (You have to convert them first though as Brent is in barrels and Gasoil in tonnes).

There is the same kind of contract on the NYMEX in the USA. The crude is called WTI, and the gasoil, Number 2 Heating Oil (expressed in cents/gallon).

But as you said in the UK we use kerosine not gasoil - is there a contract for jetfuel - that would be the best one for us to follow.

I think that uk heating oil is basically low sulphur jet kerosine, happy to be corrected though.

Mary_Hartnell

Last time I was buying heating oil, over a generation ago, there were people who used something akin to paraffin (kerosene) and burnt it in something that looked like a fat black finned radiator from a wick (These people tended to be in small local authority homes). The burner and its narrow flue was in a central downstairs cupboard from which vents led to the three bedrooms upstairs and grills sent heat to the lounge-diner and kitchen downstairs.
I've not seen one recently, though I have seen homes where this original "central heating" has been replaced with the normal gas type heating; when cheap North Sea gas became available.
The more up market way of supplying a radiator with such heat involved burning the fuel in a "walll flame" boiler: a central spinner threw the fuel onto the inside of a double thickness cylinder filled with water, where it burned. The posh version had an electric element to vaporise any fuel that managed to run down to the bottom of the cylinder, thus reducing nasty smells in light load conditions.

People with a utility room, garage or dedicated boiler housing, had a boiler with a burner strapped to what would have been an ash door for a solid fuel boiler. The pressure jet burner would squirt a spray of something akin to diesel that was ignited by an electrical arcing spark. This oil was called "35 second" oil and came with an invoice endorsed "not to be used as a road fuel".
When getting up to the small hotel type of building the boiler was bigger but with a similar burner. It would be burning a thicker gluier oil that might need preheating called 400 second oil - probably similar to the stuff that fuels marine diesels?

These days we hear a lot about "combined heat and power" - that tends to be a diesel engine making electricity and hot water.