Heating Oil Trade: Critical Player Heating Up The World Economy


How Is Heating Oil Made & How Does It Contribute to the World's Economy?
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This guide introduces heating oil as an energy commodity. We explain the main uses of heating oil and how it finds a place in the global commodity market.

Read on to find out about the biggest heating oil refineries and storages, and learn about the key drivers of heating oil prices.

Interested in learning how heating oil is traded? See our full guide, or if you want to get started trading right now, here are options available in to consider:

Disclaimer: Availability subject to regulations.
Between 53.00%-89.00% of retail investor accounts lose money when trading CFDs.

Why is Heating Oil Valuable?

Heating oil is a low-viscosity refined fuel product derived from crude oil. Its principal use is in furnaces and boilers that heat residences and businesses.

As an alternative fuel source, heating oil is popular in areas where natural gas and propane are either too costly or unobtainable, such as the northeastern United States and parts of the United Kingdom.

Heating oil is second only to gasoline in terms of products derived from crude oil.

Its crucial role as a source of heat in the winter months makes heating oil an important commodity in the global economy.

How Is Heating Oil Made?

Heating oil production takes place in oil refineries.

These industrial facilities separate crude oil, which consists of different hydrocarbons, into smaller component hydrocarbons known as fractions.

Refineries heat the crude oil at temperatures of several hundred degrees and put the boiling liquid into distillation columns called stills.

The boiling process produces heating oil as well as other fractions such as kerosene, gasoline, and butane. Each of these products is recovered at different temperature points in the boiling process.

Distillates, including heating oil and diesel, are generally recovered at temperatures between 450 to 650 degrees Fahrenheit.

The industry measures oil refiners in terms of their capacity, which is the maximum amount of crude oil that can flow into distillation units.

Biggest Heating Oil Producers & Reserves

Unsurprisingly, the top ten list of the world’s larges scale heating oil producers contains the same ten countries that have the largest storages of heating oil.

Many of these countries are also top crude oil producing countries.

Top Oil Refineries By Tank Capacity

Countries with the Biggest Oil Refining Capacity

Here are the world’s ten largest oil refineries ranked by capacity:

RankFlagCountryCapacity (Thousand Barrels per Day)
#1Flag of USAUnited States18,119
#2Flag of ChinaChina14,429
#3Russia6,356
#4Flag of IndiaIndia4,664
#5Japan3,684
#6Flag of South KoreaKorea3,068
#7Flag of Saudi ArabiaSaudi Arabia2,801
#8Brazil2,175
#9Flag of GermanyGermany2,022
#10Flag of CanadaCanada1,931

Which Countries Produce the Most Heating Oil?

The following countries produce the most heating oil. We ranked them by thousands of gallons produced each day.

Top 10 Heating Oil Producing Countries

RankFlagCountryProduction (Thousand Barrels per Day)
#1Flag of USAUnited States4,550
#2Flag of ChinaChina3,465
#3Flag of IndiaIndia1,870
#4Russia1,420
#5Flag of GermanyGermany938
#6Japan925
#7Flag of South KoreaKorea854
#8Brazil830
#9Flag of ItalyItaly738
#10Flag of Saudi ArabiaSaudi Arabia641

Where’s the Biggest Demand for Heating Oil?

The main global demand for heating oil is in the following countries and regions:

United States Demand By Consumers

About 84% of the demand for heating oil in the United States comes from the Northeast region where consumers use it to heat homes and small businesses.

The states which use the most heating oil are ranked as follows:

  1. New York
  2. Pennsylvania
  3. Massachuesetts
  4. Connecticut
  5. Maine

The South accounts for the next largest demand component for heating oil at about 9%, while the Midwest and West absorb the remaining demand.

About six million US households use heating oil as their primary space heating fuel.

Other Major Heating Oil Consumers

  • Ireland And Northern Ireland: The relatively immature natural gas network creates high heating oil demand in this region.
  • Great Britain: About 1.5 million people use heating oil for home heating. Most demand comes from areas that lack access to main gas lines.
  • Canada: The majority of heating oil demand in Canada comes from the Yukon, NWT, and Nunavut territories. These regions have sparse populations, largely undeveloped energy and transportation infrastructures, and extremely cold temperatures. Heating oil provides most of the energy used in these regions.

What Drives Heating Oil Prices?

Heating oil prices can fluctuate for many reasons, but the 6 most common ones include:

  1. Seasonal demand
  2. Price of crude oil
  3. Local market competition
  4. Regional transportation costs
  5. Alternative heating fuels
  6. Improvements in energy efficiency and insulation

If you feel like you’ve learned enough about heating oil, see our Heating Oil Trading Guide and find out how you can trade it with online brokers.

Seasonal Demand By Temperature

Heating oil mostly serves as a space heating fuel for homes and businesses. Therefore, demand for it increases in the cold winter months and declines in warmer months.

US homeowners in the Northeast, for example, often consume around 1,000 gallons of heating oil in the winter months and very little over the remainder of the year.

Unexpected events such as massive winter storms can cause huge price spikes in heating oil.

heating oil tanker
The price of heating oil can be pushed up by the cost of transporting it from oil rigs in the sea. Image by Thomas G. from Pixabay

High demand periods often require the Northeast to import heating oil from Europe or the US Gulf Coast. Transporting heating oil is expensive and can take weeks, which could lead to price spikes.

Crude Oil Prices Impact Heating Oil

Heating oil is derived from crude oil, so the price of crude oil has a major effect on the price of heating oil.

Several factors dictate the global supply and demand for crude oil:

  1. The economy: Strong economic conditions increase demand for crude oil, while weak conditions depress demand.
  2. Strength of the US dollar: Crude prices generally move in the opposite direction to the dollar.
  3. Political events: Decisions by the Organization of the Petroleum Exporting Countries (OPEC) to raise or curtail production can impact oil prices.
  4. Weather conditions: Colder months require more oil to produce heat
  5. Competition: Competing energy sources such as solar or wind power can affect crude oil prices.

Local Oil Market Competition

Heating oil is expensive and time-consuming to transport, so the number of businesses supplying it in local markets can have a big effect on prices

In rural areas with few suppliers, prices are generally higher than in suburban or urban areas. In the territories of Canada, for example, the population is sparse and there are limited options for obtaining heating oil.

These regions have the highest heating costs in the country.

Other Significant Price Determinants Of Heating Oil

  • Regional Transportation Costs: The cost of delivering heating oil to a region can greatly affect its pricing. In rural areas with undeveloped transportation infrastructure, costs are often considerably higher than in more developed regions.
  • Alternative Heating Fuels: The cost and availability of alternative heating fuels affect heating oil prices. Natural gas, for example, competes with heating oil as a source of fuel and is generally cheaper. When natural gas becomes available in areas that use heating oil, prices for heating oil usually suffer.
  • Improvements In Energy Efficiency and Insulation: Advances in technologies that keep buildings warmer could negatively impact heating oil demand. Insulated building materials and paints are examples of such technologies.

Where Can You Trade Heating oil?

Interested in trading commodities like heating oil?

Start your research with reviews of these regulated brokers available in .

IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. <b>Between 53.00%-83.00% of retail investor accounts lose money when trading CFDs.</b> You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Further Reading

To learn about how and where you can trade heating oil, see our guide on Heating Oil Trading.

If you’re unsure how you want to trade heating oil, see our guides on instruments like CFDs, options, and stocks.

Or, check out our other resources on other energy commodities:

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