www.CommoditySeasonals.com

Commodity Trading: Heating Oil Futures

Supply / Production Considerations

The supply of Heating Oil is directly related to the supply of Crude Oil, since Heating Oil is a product of refining Crude Oil. The supply or production of Heating Oil is best understood by breaking it down into two components of Crude Oil supply and available remaining supply of Heating Oil. Crude Oil supply is influenced by oil discoveries and advancements in drilling techniques. The advent of deep water oil drilling, as well as other technological advancements in oil findings, are important factors in considering the future supply of Crude Oil.

Available supply of Heating Oil is the amount already refined and ready to be used. The American Petroleum Institute releases oil supply numbers (or stocks) weekly. Most major papers present this information. When the available stocks are large, consumers and distributors have to rush to the market, causing prices to languish. When the stock positions are low, consumers and distributors have trouble obtaining needed Heating Oil, and will generally pay higher prices to meet their current needs.

Political considerations also play an important role in the available supply of Heating Oil. In 1973, the major Arab oil-producing countries banded together to form a cartel restricting the supply of Crude Oil on the world market and, thereby, inflating the price. The Organization of Petroleum Exporting Countries (OPEC) has grown considerably since 1973, but its power has diminished greatly in recent years, until last year. Last year (1999), OPEC was able to rally together, after more than a decade of "in-fighting", to curtail production, stringently follow their production quotas, and work in harmony with non members to support the price of petroleum prices. OPEC, and its cooperation with non-OPEC countries, is a major political force in the oil production area, and policy changes should be watched closely. OPEC countries include Saudi Arabia, Kuwait, United Arab Emirates, Algeria, Iran, Iraq, Libya, Qatar, Algeria, Ecuador, Gabon, Indonesia, Nigeria, and Venezuela.

The current Heating Oil market is extremely strong, as OPEC has done a masterful job of withholding supply from the market. However, any return to the old policies of infighting, stealth production, or the like, could return Petroleum prices to their OPEC price levels.

SPONSORED BY:

Commodity Trader's Almanac 2008
Scott W. Barrie
Best Price $26.37
or Buy New $26.37

Disclosure of Risk: The risk of loss in trading futures and options can be substantial; therefore, only genuine risk funds should be used. Futures and options ARE not suitable investments for all individuals, and individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option would result in a futures position.

SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY FUTURES SEASONALS THAT HAVE OCCURRED IN THE PAST 15 YEARS. THERE ARE USUALLY UNDERLYING, FUNDAMENTAL CIRCUMSTANCES THAT OCCUR ANNUALLY THAT TEND TO CAUSE THE FUTURES MARKETS TO REACT IN SIMILAR DIRECTIONAL MANNER DURING A CERTAIN CALENDAR YEAR. EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND LIQUIDATION MAY IMPACT ON THE RESULTS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT HAS IN THE PAST, OR WILL IN THE FUTURE, ACHIEVE PROFITS USING THESE RECOMMENDATIONS. NO REPRESENTATION IS BEING MADE THAT PRICE PATTERNS WILL RECUR IN THE FUTURE.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO, ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM, IN SPITE OF TRADING LOSSES, ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS, IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.