CO Locks in More of Its Fuel Costs
Sep 29, 2008, 9:26 am
#16
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Does anyone know if CO hedged a la UA (who are obliged to buy at the price specified in the hedging contract) or a la SW (who can walk away from the contract if the spot price is lower)? This clearly makes a big difference.
Sep 29, 2008, 1:32 pm
#17
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all I know is that it was with Lehman Brothers.....
Sep 29, 2008, 2:56 pm
#18
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Oil down another $10/bbl today. Good news is that even though the hedges will not be beneficial (and may cause a huge loss), the unhedged portion of the fuel needs is getting substantially cheaper.
Sep 29, 2008, 4:02 pm
#19
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Maybe CO's bean counters should hire a real commodity trader. Looking at a chart, it looks to me oil will hit 80 or below before it goes to 120 again, and I'm not even a trader. But I did call two traders who agree more with me than with CO
Sep 29, 2008, 4:10 pm
#20
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I don't know much about it, but I thought crude was a cash settled contract in all cases??????? I think that means if oil popped to $140, CO would still have to pay $140, but would have massive gains on their commodity future contracts that would bring the cost back down????
Sep 29, 2008, 7:55 pm
#21
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The oil fell sharply today on a huge rise in the USD. I'd look for the dollar to fall due to an infusion or $690 billion from the federal reserve to make liquidity(interesting how they were wanting $700 billion and do $690 billion on their own without the powergrab that they had desired from congress!)
Sep 29, 2008, 8:13 pm
#22
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That explains today, but not the drop from $140+ to ~$95 in the few weeks leading up to today. The US dollar hasn't been that strong in the past few weeks, though the 10% recovery against the GBP was quite welcome while I was there earlier in the month.
Oct 16, 2008, 11:33 am
#24
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I would imagine they would use a collar
<Q>: And then just sorry, a very quick one for (indiscernible) the downside strikes on the collars require collateral posting or might they?
<A>: They might and they do, in fact at the end of the third quarter we had $20 million posted Gary and if you would assume $80 price at the end of the fourth quarter we would expect to have roughly $37 million posted. So a lot of those hedges burn off through the quarter.
<A>: They might and they do, in fact at the end of the third quarter we had $20 million posted Gary and if you would assume $80 price at the end of the fourth quarter we would expect to have roughly $37 million posted. So a lot of those hedges burn off through the quarter.
Oct 16, 2008, 11:35 am
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Oct 16, 2008, 12:12 pm
#26
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If I wanted my oil delivered at $100, but the current contract was trading at $70, then it would cost me $30 per contract to walk away from my 'hedge' and start over. That is some serious money - per each contract.
However, as posted above, I believe CO used options to do their hedging, which are a 'cheaper' way to benefit from, or hedge against price changes in an underlying security.