How will the UK Brexit vote affect UK heating oil prices?
On Thursday 23rd June 2016, the UK voted to leave the EU in an historic referendum. The result came as a shock to many, and the stock and currency markets were no different, having bet on the UK voting to remain as a member of the EU. In the week leading up to the referendum, heating oil prices were fairly flat, while sterling strengthened significantly vs the US$.
If you are planning your fuel budget for the coming Winter or need to buy heating oil now, here are some factors to consider, before deciding when is the best time to buy.
The price of oil has fallen on the back of the exit vote. Markets like certainty and on Friday 24th June, financial markets around the globe tumbled as the Exit results from the referendum defied the odds to show a 52 percent to 48 percent victory for the campaign to leave the EU which Britain joined more than 40 years ago. In the mid to longer term, a fall in British demand for oil is not going to have a great bearing on world demand, so this will be unlikely to have much effect on oil prices.
However, other market fundamentals are at play here, with a global supply glut showing no signs of abating. With oil prices now around $50 per barrel there is also the possibility that many US refineries could reopen, after they were shut down when prices tumbled to around $30 per barrel and had made them unviable. This supply glut could keep UK home heating oil prices down for winter 2016 / 17.
Currency exchange rates also play a crucial role in the price we in the UK pay to heat our homes. Although world oil prices have fallen, GBP Sterling has taken a considerable hit since the vote to leave the EU, falling by over 10.5% vs the US$ at the time of writing. As oil is traded in Dollars, this makes purchasing oil on the world market more expensive and even though the price of Crude Oil has fallen, the fall in the exchange rate has been so severe that local heating oil prices are actually rising. If the sterling exchange rate improves against the US$, we will see lower prices for UK home heating oil (assuming oil prices remain around the same level).
While watching world oil prices and currency exchange rates, it’s important not to forget to check your own stock levels and the affect that local weather can have upon heating oil demand. If you are running low on oil (5-6 inches in the tank or less), you will want to order sooner rather than later. Brexit will also have no effect on the UK weather and the weather can also affect heating oil prices locally, so if longer term weather forecasts are indicating a cold snap, it can be a good idea to top up your heating oil tank before demand peaks and prices creep up.
Many in the UK are still unsure of the exact effects that Brexit will have on everyday life. The process of the UK leaving the EU has not officially began, and probably won’t happen until October 2016 at the earliest. The good news if you are a heating oil user in the UK is that oil is currently the cheapest method to heat your home and prices are currently 11% lower than June 2015! By ordering from ValueOils.com you are assured of our best price on any day whether you are a new or existing customer. Click here to get a quote, or call us on 028 9083 4055 and we will be happy to help.