So, when is heating oil cheapest?
The best time to buy heating oil is typically summer. It may sound counterintuitive, but the price of heating oil is affected by supply and demand. In summer, when the weather is warm and households use their heating less, the demand for heating oil is low. In turn, the price falls. Plus, delivery periods are often shorter.
You should consider bulk buying your heating oil in the summer to stock up before the autumn and winter ahead; this should deliver you the best savings.
However, wider events can also impact the price of heating oil, so the best time to buy home heating oil isn’t set in stone.
Let’s explore these factors so you know when to buy your heating oil and save your hard-earned money:
1. Demand from the world's top oil consumers
Like other industries, the demand for oil affects overall pricing. The United States and China are the top two consumers of oil in the world, and as a result, they both have a huge impact on heating oil price trends. It is suggested that the better an economy is faring in terms of employment levels and house prices etc. the greater the demand for oil and the higher the price that consumers can expect to pay for oil. So it was no surprise when the oil demand drastically tumbled during the start of the COVID-19 pandemic.
According to the BBC, America’s economy was hit by the biggest economic contraction ever recorded because of Coronavirus, and more than 20 million US citizens lost their jobs. The USA Energy Information Administration reduced its forecast for 2021 global demand growth by 500,000 barrels per day because of China facing lower consumption growth than originally predicted.
Also, the Organisation of Petroleum Exporting (OPEC) reduced its yearly forecast to an average of 90.2 million barrels per day in 2020 due to a recovery that has been weaker than expected from Asian countries.
What’s more, the Middle East, which is home to some of the largest oil producers in the world, have had to revise their oil demand from countries such as the UK and France by around 100,000 barrels per day due to reduced demand.
The pandemic has been undoubtedly a significant global challenge that has triggered huge downturns in the oil market. From January to May 2020, there was a steep drop in the average price of heating oil from approximately £547 per 1000 litres to £299 per 1000 litres.
2. Exchange Rates
Following exchange rates can help you identify when is best to buy heating oil. As oil is traded in US dollars, the value of the pound against the dollar will have a bearing on oil prices (i.e. the stronger the pound, the lower the price you should pay for your home heating oil and vice versa).
According to the Financial Times, when the coronavirus first appeared and stock markets began to plummet in March 2020, global investors quickly turned to the one currency they trusted the most: the dollar. However, a few months after, the US currency hit its lowest point in a decade, destabilising the price of oil.
3. Wars and Conflict
If there is political unrest in a country or the potential threat of war, consumers may ‘panic buy’ large quantities of oil for fear that it will be hard to access this energy source, if a country slips into disarray.
As there are a number of key oil producers in the Middle East, any political instability in this region could affect worldwide oil prices. For example, in 2020 tensions escalated between the Middle East and the USA after President Trump ordered an airstrike in Iraq. This led to oil jumping to $70 a barrel. More recently, it’s anticipated that the Taliban’s takeover in Afghanistan will lead to oil price volatility.
4. Political Turmoil
Oil is rare, unique and is something that plays a major role in practically everyone’s lives. Energy is not an everyday commodity, it is highly political, and wars have even been fought over it. And as governments around the globe have a significant impact on oil reserves and production, political influences cause oil prices to fluctuate.
An example of a politically-caused disruption in oil production is the 9/11 Attacks in the USA as oil prices briefly shot up. This sudden rise in prices was because of the panic that crude oil imports from the Middle East would stop.
5. Natural Disasters
Natural disasters often affect oil prices because they interfere with production through damaging facilities and temporarily stopping production in that area. Natural disasters also have the potential of damaging the pipelines that form the distribution infrastructure of production.
Sometimes, even just the potential risk of a natural disaster before it has happened can affect when to buy heating oil and oil prices. This is because the potential event creates uncertainty surrounding the future of oil supply and demand, and with uncertainty comes volatility in oil pricing.
Hurricane Katrina is one of the most notable natural disasters to affect the price of crude oil. The catastrophic hurricane in 2005 rocked gas and oil prices due to the number of platforms and pipelines that were destroyed during the storm. This decreased production, which lowered the available supply from the affected area.
Top Tips on When to Buy Heating Oil
- Pay attention to the news as experts often predict if oil prices will rise, fall or become volatile if a significant event is taking place or anticipated to take place. We also keep our heating oil price guide up to date with the latest trends in oil prices.
- Keep your heating oil tank full throughout the year so you don't have to worry about battling the typical price spike in winter. You can use a heating oil tank gauge to monitor your tank.
- Filling your heating oil tank in the summer could help you avoid any frustrating repair costs. This is because when your heating oil tank is low on fuel, it begins to pull moisture from the trapped air in the tank. This results in condensation on the heating oil tank's walls which can cause microorganisms to corrode your tank over time and potentially damage your entire heating oil system...and your wallet with repair bills. Having your tank serviced regularly will also help you to avoid any costly issues building up.
- When it's the best time to buy heating oil, you should try to buy in bulk. Bulk orders can help you save both money and time by ordering everything you need before prices increase. Oil can last for up to 24 months so don't worry about any of your heating oil going bad when it's not in use.
- See if your local community has a community bulk buying scheme to maximise savings when prices are lower.
We hope you now have a good understanding of when is the best time to buy home heating oil, and how this can help your money go further! At Rix, we strive to offer our customers exceptional deals so please use our quote tool to generate a quick quote or contact our team on 0800 542 4207 to secure the best deal. We also have a simple to use guide for ordering domestic fuel online.
