As many heating oil users will know, heating oil prices hit a 5 year low in January 2015, with prices reaching around $45 per barrel, falling from around $120 per barrel in the previous summer – great news for our heating oil customers.
Prices tumbled due to a number of reasons, but in particular, fracking carried out across the US massively increased supplies. Despite these increased supplies OPEC, would have traditionally cut output in order to maintain higher prices decided to maintain their current output levels at the end of November – this single action saw 2.5 pence per litre (or 6.5%) fall off the price of oil in a single day, an unheard of in the industry.
What has happened to oil prices so far in 2015?
As we have mentioned already prices hit a low in January 2015 and currently, prices are trading at around $65 per barrel. A couple of global issues have allowed UK heating oil prices to increase.
- Due to the costs involved, US fracking and drilling for oil in places where it is difficult to extract (eg North Sea) have been downscaled as it does not make economic sense to make a loss on every barrel of oil uncovered. Around $100 a barrel is required for many countries to ramp up production again. While supply remains depressed, prices will likely continue to rise.
- Unrest and fighting in Yemen has yet to affect Saudi Arabia production, however the worry that it could has caused market traders to increase prices.
- The GBP (£) has fallen significantly against the dollar ($). Oil is traded in dollars and this means that it is more expensive for the UK to purchase oil.
Should you buy heating oil now, or will prices drop again?
Many analysts are suggesting that the cart is moving before the horse, and that price rises are premature, given global demand levels. However, the recent rises do seem to be getting some traction, and prices for a barrel of crude oil have risen over 50% from the low levels reached in January 2015.
As many heating oil users will know, often purchases are dictated by necessity with heating oil levels in your tank running low, and even during the summer months you may have a requirement for heating at one stage or another due to the often promised UK summer heatwave not arriving!
We always recommend you stick to your budget when ordering heating oil, but with no real signs that heating oil prices may return to $45 a barrel, if you are thinking of putting in a larger order than normal, summer 2015 may be as good as prices get in the foreseeable future!