What if you want to have a certain amount of fuel at a fixed price at your disposal by a certain date. This can be in short notice (the next (couple of) day(s)) and in long-term (the next couple of week(s) or month(s)).
Buy a set amount of oil: physically or on paper
The only guarantee to obtain an exact amount of fuel at a fixed price on the desired date is through establishing a contract (most often with a broker). But given the fact that oil prices fluctuate, this can lead to several disadvantages. To secure yourself against these effects, you can buy a set amount of oil on paper without actually buying it. This means you will have to speculate – much like in stock exchange – without actually buying and selling the fuel.
As prices increase, you can sell the contract before it ends. In doing so, you can profit from the increased prices. Another option is to buy the fuel, stock and sell it whenever prices increase. However, this will result in extra logistic efforts and additional costs.
Apart from a contract, you could also choose to take an option. The main difference is that you will have the right to buy a certain amount of fuel for a fixed price, but you are not obliged to do so.
Would you like to know more about how you can manage ‘trading’ from the ICASA Energy Suite? Please contact us and we would be more than happy to explain you all the possibilities our software could offer you.