After the storm
Asian airlines and other heavy users of fuels received a sharp lesson about the risks associated with their hedges after fuel prices peaked in 2008 and then collapsed during a six-month period. How have they moved to improve their risk management strategies? Georgina Lee reports
The one-way, almost continuous upward momentum of West Texas Intermediate (WTI) front-month crude oil futures contract price from January 2007 to its peak of $147.27 per barrel on July 11, 2008, was only outdone by the subsequent crash in price to $35 by January 2009. The dramatic price moves in oil and correlated energy products caused acute stress for even the most sophisticated financial models and hedging strategies. And the situation was far worse for fuel users that – often operating on a
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