Top Up Heating Oil?

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Kilkis
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Top Up Heating Oil?

Postby Kilkis » Mon Mar 09, 2020 11:04 am

I don't know if people are aware but the price of crude oil is down 50 % from its early January peak. This is a combination of a drop in demand, due to reduced economic activity caused by COVID-19, and a price war between OPEC and non-OPEC oil producers. OPEC want to limit supply through the demand turn down to stop prices falling and non-OPEC producers, especially Russia, are refusing to fall into line. This fall in crude should be reflected in a drop in heating oil prices at the pump. Obviously the drop in heating oil will not be as big, because much of the price is determined by other costs, especially various taxes, but it should be noticeable. There will be a short delay between crude and heating oil price moves but heating oil could bottom out at some time between now and the end of March. If your tank is not full it might be worth watching how the price is changing at your local supplier and top up ready for next winter.

Trying to catch the price at its lowest is a matter of judgement but it is like trying to catch a falling knife so don't worry too much about getting the timing exactly right. A saving is a saving even if, with hindsight, you might have made a bit bigger saving. Also note that, while legally heating oil can be on sale until the middle of April, many suppliers stop buying during the second half of March because they don't want to be left with unsold stock through the summer. Bad for cash flow.

Warwick

amaerl
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Re: Top Up Heating Oil?

Postby amaerl » Mon Mar 09, 2020 11:23 am

Thanks for the heads up on this!

P&B
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Re: Top Up Heating Oil?

Postby P&B » Fri Mar 20, 2020 5:34 pm

About 2 weeks ago it was EUR 1.06 at my local petrol station. Then it dropped to EUR 0.99 about a week ago and yesterday I noticed it was down to EUR 0.89.

Has anyone seen it cheaper than that?

Andy
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Re: Top Up Heating Oil?

Postby Andy » Fri Mar 20, 2020 6:58 pm

This may seem a silly question but does it keep?

We topped up about to about half a tank arround this time last year (maybe a bit early) so I guess its OK.

Andy

Kilkis
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Re: Top Up Heating Oil?

Postby Kilkis » Fri Mar 20, 2020 7:49 pm

Almost every year for the last 23 years I have topped up in March ready for the next winter with no problem. I think there was only one year when it was actually cheaper in October than when I bought it in March so overall a win.

Petrol deteriorates quite quickly as the more volatile compounds evaporate leaving it more like jelly but heating oil is fine. €0.89 seems to be the cheapest around Chania. Near me it is more like €0.98. Around Athens you can find it for about €0.69. The joys of living on an island.

Warwick

Kilkis
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Re: Top Up Heating Oil?

Postby Kilkis » Tue Apr 21, 2020 9:29 am

I did manage to top up a couple of days ago, just before they stop selling, for €0.85 per litre. It's a pity they don't carry on selling through the summer. The price of a barrel of West Texas Intermediate (WTI), the benchmark for US oil, fell as low as minus $37.63 a barrel. Wouldn't it be wonderful if somebody paid us to "buy" our heating oil? I wonder if the price of the oil is negative, the government would pay us the excise duty and the VAT? Funny old world.

Warwick

filippos
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Re: Top Up Heating Oil?

Postby filippos » Tue Apr 21, 2020 5:27 pm

Nobody's going to pay a customer to take their oil. Demand has cratered with people around the world doing much less travelling during lockdown - no jaunts to the seaside (well a few, maybe, for some), not much commuting, few aircraft flying, people being economical with oil heating lest they run out, factories shutting down or working part time etc. Add to that there's recently been huge oversupply especially while the Russians and Saudis have been trying to push the price down in an attempt to disrupt one another's economy and, more especially, to force the US shale oil industry into shutting down, a tactic that seems to be working. In the last week or so several US shale oil companies have filed for bankruptcy and some of the biggest banking groups - thing Goldman Sachs and their ilk have set up or are in the process of setting up their own specialist companies to run the failing oil companies.

Oil has been so over produced that the world is running out of storage capacity. Those with all the stored oil don't want to sell their stock at current price levels as much of what they are holding cost more, possibly as much as much as double or triple the price now. They've topped up their storage tanks and many are content to sit and sell none until the price rises again. Their big problem will be when the next tanker arrives at the oil terminal and there's no storage capacity to offload it to.

filippos
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Re: Top Up Heating Oil?

Postby filippos » Tue Apr 21, 2020 5:34 pm

Kilkis wrote:...The price of a barrel of West Texas Intermediate (WTI), the benchmark for US oil, fell as low as minus $37.63 a barrel.
I might be mixing this up with a different report but isn't WTI oil a specialist product used in the manufacture of asphalt and no suppliers accepted any orders at the "discounted" price.

Kilkis
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Re: Top Up Heating Oil?

Postby Kilkis » Tue Apr 21, 2020 9:20 pm

It was WTI but I think it is used for more than producing asphalt. It is also one of the worlds major benchmarks for pricing oil, like Brent crude.

Speculators, who have no use for the oil but who thought the price of oil would go up a little while ago, bought futures contracts that become due about now. They guessed that the actual price of oil would be more than they paid for the futures contracts so they would be able to sell them at a profit, e.g. part way between what they paid and the actual price, close to their delivery date. They got it wrong. Nobody wants the oil so nobody wants the futures contracts. If they don't sell the contracts they have to take delivery of the oil in Cushing, Oklahoma and storage space in Cushing is now virtually non existent. It is cheaper for them to "sell" the futures contracts at a negative price, i.e. pay someone to take them rather than have to pay astronomical storage prices. Someone who can immediately make use of the oil or has spare storage capacity will "buy" the contract, i.e. get paid to take the contract and take delivery.

It really is "paying someone to take the oil".

Warwick

filippos
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Re: Top Up Heating Oil?

Postby filippos » Wed Apr 22, 2020 11:45 pm

According to an interview with an oil industry expert I listened to today the negative WTI price has a simple explanation and is unrepresentative of the overall situation. What he said was,

"First of all the WTI thing, lets just nip that one in the bud. WTI is a Nymex US Futures contract it's not a global oil price at all. So you've got this American contract; now Cushing is a town in Oklahoma with about 5½ thousand people living in it and it's a physically delivered petrol contract which means you've actually got to rock up and pick up the oil. This is not good when you've got a global oil price then you've got a town in Oklahoma. Normally that works fine because you're looking at a financial contract at the end of the day and most of the oil is consumed before it ever gets there but this time it's physically delivered and it's piling up. You know the US was using 13 million barrels a day until recently and round the world a 100 million and, of course, oil, what is it. In a word it's transport, planes, trains, automobiles and shipping...the main reason we have oil. In a world where no-one's moving this stuff is piling up and the only thing you can do with it is put it in tanks or in a tanker. Now, the tankers are already full so that means there's now a whopping great big surplus. This surplus will come down; it will be consumed in future but it's a temporary problem. Brent is the International contract and it's cash settled, not physically settled; how would you physically settle an international contract .......... but it's a cash settled contract so it can't go negative. Now the reason WTI went negative because they were literally begging people to take the oil off their hands. It's a very unusual situation and it's caused because no0one's driving anywhere and no planes are flying and so on...... I think the low oil price is over stating the deflation shock and we shouldn't be thinking about negative $40 WTI... it's a technical situation. We should think about $17 Brent which I think is a much more accurate reflection of what's going on in the world."

Kilkis
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Re: Top Up Heating Oil?

Postby Kilkis » Thu Apr 23, 2020 8:59 am

Basically the same as my explanation but much more rambling. I agree it is not world wide and is peculiar to WTI but it is still paying someone to take oil off your hands.

Warwick

BST
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Re: Top Up Heating Oil?

Postby BST » Thu Apr 23, 2020 5:50 pm

Fingers crossed for cheap heating oil next winter!

filippos
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Re: Top Up Heating Oil?

Postby filippos » Fri Apr 24, 2020 9:33 pm

Apparently futures contracts for Brent crude for June this year are already up around $25/barrel and many in the industry are forecasting a steady rise as the present surplus starts to be used up as industry begins getting back to work with everything that involves, like workers commuting again, passenger aircraft back in the skies, road freight increasing etc., etc.plus, of course, the oil industry wanting to recoup losses caused by the crisis.

mouche
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Re: Top Up Heating Oil?

Postby mouche » Sun Apr 26, 2020 7:38 am

The government will be bringing legislation within the coming week that extends the period for the sale of heating oil in order to help offset the reduced turnover for fuel sellers, Finance Minister Christos Staikouras revealed on Open TV on Saturday. He noted that the pressures on the sector will start to abate within the next couple of weeks, however, in line with central planning by the government.

http://www.chaniapost.eu/2020/04/25/gov ... LdfF1tvB4k

Kilkis
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Re: Top Up Heating Oil?

Postby Kilkis » Sun Apr 26, 2020 9:51 am

I did notice on Friday that my local garage still had a price sign up for heating oil and I though it was odd. I had expected him to have stopped selling it by now but the article explains why he hasn't. I am not sure how successful the measure will be. I think the vast majority of Greeks will not think about buying heating oil until the weather turns cold again in the autumn.

When I lived in northern Greece my landlord, who lived upstairs, and I had a shared boiler. When I first suggested to him filling the tank with oil just before they stopped selling it in April he was completely shocked. Why would anybody buy oil in April when they didn't need it until October? It took quite a while to convince him that the oil would probably be more expensive when it went on sale in the autumn. Eventually he agreed and was delighted when indeed the oil was more expensive later in the year. After that he did it every year without me having to suggest it. There was only one year when the strategy failed and the oil was less expensive in the autumn but overall we saved quite a bit of money. I've continued doing it since I moved to Crete and it has been a successful strategy a lot more times than not.

The illegal reprocessing of red diesel to remove the colouring, so that it can be sold as transport diesel, used to be done on an industrial scale in Greece. The banning of the sale of red diesel in the summer, when it is not really needed, was done to try to restrict that activity. As the discount on red diesel has gradually been reduced over time I presume the government now think it is not worth the effort so they can relax the rule.

Warwick


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