Gasoline and heating oil are oil products trading on the CME’s NYMEX division. As gasoline is seasonal, prices tend to increase to annual peaks as the driving season that runs through the spring and summer approaches. Meanwhile, heating oil futures are a proxy for distillates, including jet and diesel fuels. While heating oil implies higher demand during the colder fall and winter months, the distillates are year-round fuels, so prices remain steady and reflect crude oil prices throughout the year without the same seasonality as gasoline.
Oil products reflect crude oil prices as the energy commodity is processed or cracked into products in petroleum refineries. Crack spreads reflect the economics of processing the oil into gasoline and distillates. Oil refineries do not speculate on the price of crude oil inputs or oil product outputs, but they are at risk for crack spread levels, which are the processing costs. When crack spreads rise, refineries make more money; refineries make less or lose money when they decline. Valero Energy Corp (VLO) is a leading U.S. oil refining company, and its shares have exploded higher from the March 2020 low.
