Heating oil futures prices may hit new highs this year because of higher crude oil prices and the fact that a new refinery has not been built in the United States since 1976. This limited refinery capacity leaves heating oil futures prices vulnerable to price spikes if there are refinery problems, weather problems, political tensions in an oil producing region of the world or any other problem that hinders that flow of oil distillates from point A to point B.
Refineries have a vested interest in not storing too much heating oil. Storage and insurance costs cut into the profit margins so it makes sense to produce distillates when needed and not before. This can artificially limit supply and can influence distillate futures prices to the upside. The current situation in the United States is 27 year highs in inventories of distillates and consequently prices are near their yearly lows. This may leave the energy markets vulnerable to bullish price spikes over the next few months especially if the typical trend for world demand to increase in the second half of the year uses up the available inventories of heating oil.
The hurricane season now lasts from June 1 to December 1 and any major storms in the Gulf of Mexico may force evacuations of oil drilling platforms. Storms may also shut down important ports and shipping lanes if they approach the mouth of the Mississippi River. There are also many refineries near the Texas coast which may be damaged or shut down based on the severity of the storms. Any disruption in the production or transportation of heating oil from point A to point B can push futures prices dramatically higher.
Futures, options and foreign exchange products carry significant risk of loss. Past performance is not indicative of future results.
The author of this article is a 17 year veteran of the heating oil futures and options markets and the President of T & K Futures and Options, Inc.
Article Source: http://EzineArticles.com/expert/MK_Smith/43172
Refineries have a vested interest in not storing too much heating oil. Storage and insurance costs cut into the profit margins so it makes sense to produce distillates when needed and not before. This can artificially limit supply and can influence distillate futures prices to the upside. The current situation in the United States is 27 year highs in inventories of distillates and consequently prices are near their yearly lows. This may leave the energy markets vulnerable to bullish price spikes over the next few months especially if the typical trend for world demand to increase in the second half of the year uses up the available inventories of heating oil.
The hurricane season now lasts from June 1 to December 1 and any major storms in the Gulf of Mexico may force evacuations of oil drilling platforms. Storms may also shut down important ports and shipping lanes if they approach the mouth of the Mississippi River. There are also many refineries near the Texas coast which may be damaged or shut down based on the severity of the storms. Any disruption in the production or transportation of heating oil from point A to point B can push futures prices dramatically higher.
Futures, options and foreign exchange products carry significant risk of loss. Past performance is not indicative of future results.
The author of this article is a 17 year veteran of the heating oil futures and options markets and the President of T & K Futures and Options, Inc.
Article Source: http://EzineArticles.com/expert/MK_Smith/43172
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