Heating oil
Heating oil, in the USA also known as No. 2 fuel oil, is used to fuel building furnaces. It is usually dyed to distinguish it from taxed vehicle fuel. It is delivered by tanker truck to individual homes and stored in tanks in the basement or burried tanks in the garden. Leaks in older tanks and piping are an environmental concern. Heating oil is very similar to diesel fuel.
Heating oil trade
Heating oil accounts for about 25% of the yield of a barrel of crude oil, the second largest "cut" after petrol. The heating oil futures contract trades in units of 42,000 gallons (1,000 barrels) and (for the USA) is based on delivery in the New York harbor. Options on futures, calendar spread options contracts, crack spread options contracts, and average price options contracts give market participants even greater flexibility in managing price risk.
The heating oil futures contract is also used to hedge diesel fuel and jet fuel, both of which trade in the cash market at an often stable premium to NYMEX Division New York harbor heating oil futures.