It has been a very strange winter season for the heating oil industry in the UK. Very mild weather has dampened demand and, as a result, prices have stayed unseasonably low throughout the winter months as the average price chart shows below.
That in itself is not unusual as demand is one of the biggest contributors to rising heating oil prices however, data from Nasdaq.com indicates that since the beginning of February, Brent Crude oil has risen from just above $105 a barrel to over $109 without any signs that this is impacting on UK heating oil prices.
The US Freezes and Heating Oil Prices Rise
The rise in Brent crude is largely down to what is happening in the US. As you may have seen on the news recently, the US has experienced some extremely cold temperatures this winter and, according to the Wall Street Journal, there is no sign of a let-up in these cold temperatures in the next two weeks. As a result, demand for heating oil has rocketed, reducing stocks and hence raising prices in the US, but ONLY in the US. Since heating oil is refined from crude oil, this has caused international prices (including Brent Crude which UK heating oil prices largely follow) to increase.
Other Pressures on Oil Prices
To add further pressures on the price of crude oil, Libya has recently reported that they are, once again, seeing disruption to supplies due to protests at major oil fields. A recent Reuters report also suggests that protests that have arisen in Venezuela are raising supply worries, causing crude oil prices to increase. Add to this the fact that the US dollar dropped to a six week low on Monday and the European economies are picking up, all the ingredients for higher oil prices and hence heating oil prices are in place.
So you could conclude that UK heating oil users have actually got off fairly lightly this winter. The mild weather has offset rises in oil prices caused by US demand. This is no comfort for those in fuel poverty struggling to pay the bills but it does at least mean the usual mad dash for heating oil hasn’t happened and, as a result, prices have stayed relatively stable. Whether the situation will remain this way is difficult to say. A sudden cold snap in Europe or serious supply issues elsewhere in the world could be all it takes for heating oil prices to start rising again.
In the meantime, we can celebrate the fact that, as reported by OFTEC on 17th February 2014, heating oil is the only primary heating fuel that has come down in price over the past three years.
For more information on oil prices:
OFTEC press release on heating oil prices : http://www.oftec.co.uk/news_and_press_releases/oil-is-the-only-heating-fuel-where-prices-have-fallen
Nasdaq reports on the trends in Brent Crude prices : http://www.nasdaq.com/markets/crude-oil-brent.aspx