The Mercatus Energy Pipeline

If you don't spend much time our website, beyond our blog, you might have missed the following articles we've written for various industry publications in recent months. Regardless of your role or industry we think you'll find most of them to be of interest as all are relevant to various aspects of energy hedging and risk management.

Over the past year, refining profit margins have been quite volatile. As an example, Brent crude oil/gasoil calendar swap crack spreads have traded as high as $20.56/BBL and as low as $12.12/BBL, averaging $16.17/BBL.  Crack spreads on other crude oils (Dubai, WTI, Light Louisiana Sweet, etc.) and various refined products (diesel, gasoline, jet fuel, etc.) have been similarly volatile. 

In recent weeks, we've spoken with many bunker fuel consumers (cruise lines, shipping companies, etc.) who are seeking "more creative" hedging strategies that they can consider employing to hedge their exposure to bunker fuel prices. 

Forward prices for crude oil and refined products have once again posted month-over-month losses, led by Gulf Coast fuel oil. On average, the forward curves for the primary, global crude oil and refined products have declined 1.5%% over the past month.

As we discussed in A Beginner's Guide to Crude Oil Options - Part I Part II & Part III, there are four primary factors that determine the price of crude oil, as well as refined product, options:

As we discussed A Beginner's Guide to Crude Oil Options - Part I & Part II, there are four primary factors that determine the price of crude oil, as well as refined product, options:

This post is the second in a series on crude oil options.  This first post in the series can be found via the following link: A Beginner's Guide to Crude Oil Options - Part I.  As mentioned in the previous post, there are four primary variables that affect the premium or price of crude oil options (as well as options on other energy commodities):

We're often asked to explain what determines the price of crude oil (as well as bunker fuel, diesel fuel, gasoil, gasoline and jet fuel) options. This post will be the first in a series on how the pricing of crude oil options.

While most companies begin their energy hedging initiatives with the best of intentions, human nature often leads many down the wrong path, down the path of a speculator.  While speculation isn't a bad thing in and of itself, after all hedgers need speculators to provide them with liquidity, speculation masked as hedging often leads to incredibly undesirable results.

Since our April update, forward prices for crude oil and refined products have declined significantly, esentially erasing the gains from the prior month.  On average, the forward curves for the core, global crude oil and refined products have declined 5.84% over the past month, led by NYMEX RBOB gasoline which declined by 7.93%.