Heating Oil

Specifications

Trading Unit
42,000 U.S. gallons (1,000 barrels).

Trading Hours
9:50 A.M. to 3:10 P.M., for the open outcry session. After-hours trading is conducted via the NYMEX ACCESS electronic trading system from 7 P.M. to 9 A.M. on Sundays and 4 P.M. to 9 A.M., Mondays through Thursdays. All times are New York time.

Trading Months
Trading is conducted in 18 consecutive months commencing with the next calendar month (for example, on October 1, 2001, trading occurs in all months from November 2001 through April 2003).

Price Quotation
In dollars and cents per gallon: for example, $0.7527 (75.27˘) per gallon.

Minimum Price Fluctuation
$0.0001 (0.01˘) per gallon ($4.20 per contract).

Maximum Daily Price Fluctuation
Initial limits of $0.06 (6˘) per gallon are in place in all but the first two months and rise to $0.09 (9˘) per gallon if the previous dayŐs settlement price in any back month is at the $0.06 per gallon limit. In the event of a $0.20 (20˘) per gallon move in either of the first two contract months, limits on all months become $0.20 per gallon from the limit in place in the direction of the move following a one-hour trading halt.

Last Trading Day
Trading terminates at the close of business on the last business day of the month preceding the delivery month.

Delivery
F.O.B. seller's facility in New York Harbor, ex-shore. All duties, entitlements, taxes, fees, and other charges paid. Requirements for sellerŐs shore facility: capability to deliver into barges. Buyer may request delivery by truck, if available at the sellerŐs facility, and pays a surcharge for truck delivery. Delivery may also be completed by pipeline, tanker, book transfer, or inter- or intra-facility transfer. Delivery must be made in accordance with applicable federal, state, and local licensing and tax laws.

Delivery Period
Deliveries may only be initiated the day after the fifth business day and must be completed before the last business day of the delivery month.

Alternate Delivery Procedure (ADP)
An Alternate Delivery Procedure is available to buyers and sellers who have been matched by the Exchange subsequent to the termination of trading in the spot month contract. If buyer and seller agree to consummate delivery under terms different from those prescribed in the contract specifications, they may proceed on that basis after submitting a notice of their intention to the Exchange.

Exchange of Futures for, or in Connection with, Physicals (EFP)
The commercial buyer or seller may exchange a futures position for a physical position of equal quantity by submitting a notice to the Exchange. EFPs may be used to either initiate or liquidate a futures position.

Grade and Quality Specifications
Generally conforms to industry standards for fungible No. 2 heating oil.

Inspection
The buyer may request an inspection for grade and quality or quantity for all deliveries, but shall require a quantity inspection for a barge, tanker, or inter-facility transfer. If the buyer does not request a quantity inspection, the seller may request such inspection. The cost of the quantity inspection is shared equally by the buyer and seller. If the product meets grade and quality specifications, the cost of the quality inspection is shared jointly by the buyer and seller. If the product fails inspection, the cost is borne by the seller.

Position Limits
7,000 contracts for all months combined, but not to exceed 1,000 in the last three days of trading in the spot month or 5,000 in any one month.

Margin Requirements
Margins are required for open futures or short options positions. The margin requirement for an options purchaser will never exceed the premium.

Description

Heating oil, also known as No. 2 fuel oil, accounts for about 25% of the yield of a barrel of crude, the second largest "cut" after gasoline. In its early years, the heating oil futures contract attracted mainly heating oil wholesalers and large consumers. It soon became apparent that the contract was also being used to hedge diesel fuel, which is chemically similar to heating oil, and jet fuel, which trades in the cash market at a usually stable premium to NYMEX Division heating oil futures.

Today, a wide variety of businesses, including oil refiners, wholesale marketers, heating oil retailers, trucking companies, airlines, and marine transport operators, as well as other major consumers of fuel oil, have embraced this contract as a risk management vehicle and pricing mechanism. The recent imposition of strict federal sulfur standards for diesel fuel have the potential to increase price volatility in some markets.

Seasonal and economic factors influence the relative prices of heating oil, gasoline, natural gas, propane, and crude oil. By spread trading heating oil futures against other NYMEX Division energy futures contracts, businesses are able to fix margins among products. Marketers and traders can also lock in a return for carrying heating oil inventory by spread trading calendar months.

Because NYMEX Division heating oil futures are traded over 18 consecutive months, traders can implement hedging strategies that encompass two winter heating seasons.

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