Hedging physical oil positions

Hi Guys,

I am lloking to understand more about hedging of fuel oil.

My question concerns Fuel Oil 180 and 380 Cst.
I would like to know which derivatives are commonly utilised by traders to hedge physical positions (long) of Fuel Oil 180 and 380 cst as quoted by the Platts reports on FOB AG and FOB Singapore basis.

Could anyone advise me on which derivatives are utilised, futures, options, swaps, ... to hedge above mentioned products and said locations? And on which exchanges, the ICE, ... such papers are traded.

Well scrutinised the web but without success to understand properly.

Thanks in advance for yours.

Rgds,
Lucas

Lucas.p said:

Hi Guys,
My question concerns Fuel Oil 180 and 380 Cst.
I would like to know which derivatives are commonly utilised by traders to hedge physical positions (long) of Fuel Oil 180 and 380 cst as quoted by the Platts reports on FOB AG and FOB Singapore basis.

Could anyone advise me on which derivatives are utilised, futures, options, swaps, ... to hedge above mentioned products and said locations? And on which exchanges, the ICE, ... such papers are traded.

Click to expand...

Market commonly use swaps/futures and options to hedge their physical fuel position. Contracts can be cleared via ICE, CME, NOS or SGX and all contracts use Platts as index.

If you need further details, please contact me via pm.

Kaizens said:

Market commonly use swaps/futures and options to hedge their physical fuel position. Contracts can be cleared via ICE, CME, NOS or SGX and all contracts use Platts as index.

If you need further details, please contact me via pm.

Click to expand...

Hi Kaizens,

First apologises for late reply, but I was out of this forum for sometimes.
Thank you for your message.

I have made some progress on my side too and had the following.

Physical: 380 cst cargo purchased CFR fujairah pricing basis platts 180 cst.

Paper: SGX Futures 180 or 380 cst

My client is buying CFR Fujairah and selling FOB Fujairah.

Actually the product is hedged once it reaches the storage tank.

knowing the buy side price fixing (platts 180 cst) for 380 cst cargo, and cargo being sold either on 180 cst platts reference or 380 cst reference, could pls advise which derivatives is the most suitable?

Besides, in the platts marketscan, a premium (or discount) is added to the HSFO 380 base price. what does this mean?
HSFO 380 = $590 and prem/disc = $9
=> traded price = $599?

Then as the premium fluctuate too is it possible to hedge it?

Thanks for your kind help.

Lucas