According to MarketMatrix.net, more and more companies are eager to protect themselves from another surge in oil prices, and the trading volume of refined oil hedging has risen to a high level not seen in many years.
Over the past few weeks, airlines - a cornerstone of the pre-Covid-19 hedging trade - have resumed operations on a massive scale. Some newbies are also getting in on the action, including truck-making companies and even the Walt Disney Co. is again hedging its bets.
This development shows that companies that use large amounts of fuel are worried about another potential price increase. Economies around the world are struggling with unusually high inflation, which is being driven by energy costs.
"There have been more inquiries about fuel hedging in the last few weeks and months than in years past," said Patrick McClain, director of business development for hedging solutions at AEGIS. The company helps companies develop hedging strategies for .
Consumers are hedging refined oil products as oil prices surge _By Bloomberg
Disney Chief Financial Officer Christine McCarthy said on a conference call with analysts last month that the company paused hedging during the epidemic and has now resumed it.
Among airlines, the most obvious is European budget airline Wizz Air Holdings. The company canceled its hedges after recording huge losses during the pandemic, but recently reinstated them in the face of continued price surges.
Since the outbreak of the Russia-Ukraine War, Brent crude oil futures have risen by 20%, while refined oil prices have increased even more.
What is certain is that the cost of hedging is very high based on the current high prices. In recent months, hedging costs have soared further due to a lack of liquidity, while finding rivals has become more difficult, after prices soared following the outbreak of the Russia-Ukraine war.
Oil prices have continued to move higher in a wave of volatility this year _By Bloomberg
Some airlines have been lucky enough to extend their hedges into next year.
"We are very fortunate that over the next 12 months we are well hedged on refined products," Ryanair Holdings CEO Michael O'Leary said on last month's earnings call indicated above. "I think it's more luck than extremely smart risk management. But nonetheless, 80% of our cost oil is hedged ahead of time at less than $70, and that's until March 2023."
Some participants It said that recent hedging transactions have mainly occurred in the over-the-counter market , adding that hedging transactions also occurred in the U.S. heating oil and diesel contracts.
Traders said many businesses have been taking advantage of any dips in prices - such as those seen last week - by setting up hedging trades.
They hope to prevent what some analysts see as a shock to prices in the coming months as the war lengthens and the supply-demand imbalance grows.
"We have a very strong refined products hedging program at Disney World that reduces risk and minimizes volatility, reducing volatility in fuel costs," McCarthy said. "We have reopened the program and we are doing everything we can to minimize the impact on specific costs."
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