NYMEX heating oil price
What "NYMEX heating oil" really is now
The contract took the NY Harbor ULSD name with the May 2013 delivery month, when the sulfur spec tightened from up to 2,000 ppm to ultra-low-sulfur diesel at 15 ppm. CME changed the specification of the existing heating oil contract rather than de-list it, so it is the same contract, the same 42,000-gallon size and the same delivery point. The name "NYMEX heating oil" persists in trade press. EIA
How the futures and this spot relate
The HO contract is physically delivered. Open positions at expiry call for delivery of ULSD into New York Harbor, 42,000 gallons a lot. The daily EIA spot above is an assessment of that same physical barge market. One market, two measurements of it, with traders free to arbitrage between them, which is why the two track within pennies and pull together into expiry. So the spot is the practical wholesale read for a homeowner: it is the number dealers price next week's board rate from, and it is published daily and free, which the futures settlements are not. CME
How to read the curve as a homeowner
- Backwardation. Front-month above back-month. Market expects supply tightness now, easing later. Translates to: pre-buy cap is cheap, will-call risk is higher.
- Contango. Front-month below back-month. Storage is being paid for. Translates to: pre-buy fixed is fairly priced, cap fee is rich.
Wholesale-to-retail pass-through
A $0.10/gal move in HO front-month maps to roughly $0.07/gal at retail within 30 days, holding crack spread and dealer margin constant. A $0.50/gal sustained move maps to $0.35 retail. This is the rule the crude shock scenario uses.