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An Introduction to Fuel Hedging

Natural Gas Hedging for End-Users

The Mercatus Energy Pipeline

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Chicago & Group 3 ULSD Basis Blowouts Provide Fuel Hedging Lesson

 

On Friday Chicago ULSD spot prices jumped $0.1875/gallon putting Chicago spot prices at $0.29 over November NYMEX ULSD futures, the highest Chicago ULSD has traded vs. NYMEX since May 2013 when it traded at $0.33 over NYMEX. Similarly, Group 3 ULSD spot prices increased $0.0525 to $0.2625 over NYMEX ULSD futures, the highest it has traded vs. NYMEX since distillate basis differentials began referencing the NYMEX ULSD futures (previously distillates basis differentials referenced NYMEX heating oil futures). What's driving Midwest prices higher? Maintenance at refineries throughout the Midwest and strong agricultural demand for diesel.

Opportunistic Diesel Fuel Hedging Strategies as Oil Markets Collapse

 

As crude oil and refined products continue to decline, we're hearing from many commercial and industrial fuel consumers who are looking for "opportunistic" hedging strategies that will protect them against higher prices while not exposing them to downside price risk, should prices continue to decline from here. While most fuel consumers tend to hedge with traditional strategies such as swaps, call options and costless collars, markets with strong downward (as well as upward) momentum, such as the current one, tend to cause many hedgers to want to think outside of the box. 

An Introduction to Consumer Natural Gas Hedging - Part III - Basis

 

This post is the third in a series where we are exploring the various hedging strategies which are available to commercial and industrial natural gas consumers. The first and second posts can be found via the following links: An Introduction to Consumer Natural Gas Hedging - Part I, and An Introduction to Consumer Natural Gas Hedging - Part II.  In future posts we'll explore how commercial and industrial natural gas consumers can hedge with options and more complex instruments.

Are Crude Oil Prices in the Early Days of a Sustainable Bear Market?

 

As crude oil prices have declined by over 20% since late June, many are now wondering, are prices approaching a bottom or are we in the early days of a sustainable bear market?

An Introduction to Consumer Natural Gas Hedging - Part II - Swaps

 

This post is the second in a series where we are exploring the various hedging strategies which are available to commercial and industrial natural gas consumers. You can access the first post, An Introduction to Consumer Natural Gas Hedging - Part I, via this link.  In subsequent posts we'll explore how commercial and industrial natural gas consumers can hedge with options, basis swaps and more complex instruments.

An Introduction to Consumer Natural Gas Hedging - Part I - Futures

 

As we once again approach the winter heating season, we've received several questions regarding consumer (end-user) natural gas hedging. As such, this is going to be the first post in a series of several where we explore the various hedging strategies which are available to commercial and industrial natural gas consumers.

Join Us October 15-16 for Our Final Seminar of 2014

 

On October 15-16 in Houston we are hosting our final energy hedging, trading and risk management seminar of 2014. The seminar, which is geared towards professional from companies which consume, produce, process, refine, trade and market energy commodities, as well as those in related businesses, will cover numerous aspects of hedging, trading and risk management, from the basic fundamentals to more advantage strategies. We'll be covering the majority of the primary hydrocarbon markets including crude oil, refined products (bunker fuel, diesel fuel, gasoline, jet fuel), natural gas and natural gas liquids (propane, ethane, butane and natural gasoline).

Are SDRs Exposing the Details of Large Oil Hedging Transactions?

 

Based on our conversations with hundreds of commodity hedgers, its safe to say that many, if not most, participants in the energy commodity markets, especially end-users such as consumers, marketers, producers, processors, etc., are not strong advocates of Dodd-Frank (as well as EMIR and similar market regulations around the world), primarily because said regulations far too often limit their ability to manage their commodity, foreign exchange and interest rate risk as they would choose to do and did for many years. That being said, a new, unintended consequence of Dodd-Frank has surfaced in the crude oil derivatives market in recent weeks. The unintended consequence being that trades which are being submitted to SDRs (swap derivative repositories) are providing other market participants with far more details of the transactions than many were led to believe would be the case.

October 2014 Oil & Gas Hedging Update

 

As has been the case with cash and futures prices the better part of the past few weeks and months, forward prices for crude oil and refined products have all declined significantly since our last update in early September with Brent crude oil and Singapore 380 CST fuel oil leading the complex lower, down 3.86 and 3.96% respectively. The Brent-WTI one year forward curve continues to narrow, declining from $9.83/BBL to $8.23/BBL since our September update. On average, one year forward crude oil prices have declined by an average of 3.19% since our last update while refined products have decline by an average of 3.23%. Forward crack spreads are mixed with the Brent-gasoil crack widening $1.82/BBL or 12.36% to $16.55 while USGC jet fuel - LLS crack narrowed by $1.95/BBL or 9.69% to 18.14/BBL.

Crude Oil & Products Selling Off - What Is Your Hedging Strategy?

 

After reaching 2014 highs in late June, crude and product prices have declined significantly over the past few months cumulating with the largest one day losses (both on an absolute and percentage basis) of the year in prompt WTI, Brent, ULSD and RBOB gasoline futures (excluding days where futures rolled forward to a new prompt month). Why?

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