Since December, Average heating oil prices in England have fallen by 57.5%
Breaking News Today found that on the 12th Dec 2019, the average cost for a litre of heating oil was at 56.44p Yesterday the average price per litre was down to an astonishing 23.97 pence.
One thousand litres of oil would have cost £564.40 but as of today can now be picked up for as little £240.09 a saving of £325.31.
What is fuelling this massive reduction in the price of heating oil?
Heating oil commonly known as kerosene is produced from crude oil.
Kerosene is also the largest component of aviation fuel and accounts for over 60% of the fuel mixture.
The price of US crude oil turned negative on the 20th Apr 2020, for the first time in history.
The price of a barrel of oil, from WTI (West Texas Intermediate), which is commonly used as the benchmark for US oil, fell as low as -$37.63.
This means oil firms we’re paying buyers to take the oil as they fear their storage capacity can not handle the surplus of oil.
To give you an example of how drastic this change was, at it’s highest point in 2020, it was trading at $65.08 a barrel.
Since January, oil has had strong bearish trends, indicating the price is dropping with fast momentum.
What is causing oil prices to drop?
The downtrend is being caused by a lack in demand for oil products such as fuel and other conventional products made from crude oil.
With around 50% of the world currently under some form of lockdown, the need for oil-related products is at an all-time low.
It’s not just about whether we can use it, it is also about whether we can store it until the lockdowns are eased enough, to generate some additional demand for oil products.
The UK and the rest of the world get their benchmark from Brent Crude OIL, which is also down to less than $21 per barrel.
At its highest point, it was trading at $71.25.
For people on Oil Heating, this is already having a massive effect on their prices.
But more can follow, OGUK, the business lobby for the UK’s offshore oil and gas sector, said the negative price of US oil would affect firms operating in the North Sea.
“The dynamics of this US market are different from those directly driving UK produced Brent, but we will not escape the impact,” said OGUK boss Deirdre Michie.
“Ours is not just a trading market; every penny lost spells more uncertainty over jobs,” she said.
Although production levels have been reduced drastically, it is still not enough to offset the fall in demand, which is at the lowest levels in 25 years.
A recent report from The International Energy Agency (IEA) warned markets to brace for an unprecedented lack in demand, that will reach levels not experienced since 1995.
Should I fill up my oil tank now?
While there is still the potential for the price to decrease some countries are starting to relax lockdown measures, this could lead to an uptake in demand and cause oil markets to begin to recover.
It would be advisable for people with oil central heating to at least consider filling the tank while prices are still low.
