No, not the Glen Fry hit from the 80’s Eddy Murphy classic Beverly Hills Cop – we’re talking about heating oil. Though far less discussed than its close crude oil-based cousin (gasoline), heating oil has been on just as much of a tear over the last couple of months. It’s up nearly 12% since the December 10th low:

Chart courtesy Finviz.com. Disclaimer: past performance is not necessarily indicative of future results.

Over the same period, crude oil is up 11% and gasoline is up 16%… but with the Northeast expecting a historic Nor’easter today – Heating Oil is seeing a bit more of a jump than Crude Oil (even though it is made from Crude Oil). Why?

Well, there’s the usual concern about the storm disabling some refining capacity. Beyond that, heating oil is a strange commodity, and  most of its domestic use takes place in the Northeast. In fact, “about 6 percent of US homes rely on heating oil as their primary source of warmth, with about 80 percent of them in the Northeast.” And the trading for heating oil is on the smaller side in terms of volume (average of 48,000 per day in January versus crude oil at 208,000, or natural gas at 125,000) No other commodity we can think of is so localized in its demand base, and thus so likely to impacted by a single regional event. But even with its special status and , it is in more multi-market portfolios that we come across than you might expect.

Two such programs we track already have a stake in this scenario. Covenant Capital Aggressive is currently long heating oil, and would definitely be pleased with a further spike in prices. Auctos Capital, on the other hand, is short the HO calendar spread (short March, long April), meaning they’d rather see a mild response to short-term weather concerns. As New Englanders prepare for another battering from Mother Nature, we’ll be watching to see if the snows out East cause the markets to turn up the heat.