Dan-Bunkering: Hedging is a Perfect Tool to Secure Stable Bunker Prices

Henrik Zederkof, CEO at Dan-Bunkering, says hedging or paper trading is a massive support to the oil industry

Henrik Zederkof, CEO at A/S Dan-Bunkering Ltd. (Dan-Bunkering) says that hedging is a strong tool to help mitigate the risk of volatile oil prices, but notes that it must be used for the "right reasons," Maritime Professional reports.

"Hedging or paper trading is a massive support to the oil industry, as no producer, storage holder, supplier or end user wants to take on the risk of volatile oil prices," says Zederkof.

"If we believe we know where the market is going and we speculate in that belief, then hedging becomes high risk gambling.

"Thus, we are very thorough when guiding our clients and partners so we make sure that they use the tool right and understand the possibilities and risks within the tool before entering into any hedging deals."

Dan-Bunkering says that while it offers hedging as a service to its clients, it only uses hedging as method to secure bunker prices or to "lock" in a maximum price for bunkers.

The company adds that it does not use pure paper trading to speculate in the future development of oil prices, considering it equal to speculation.

"However, when a client has a contract for transport and wants to secure a stable bunker price for the contract and in that way manage the risk of increasing oil prices, hedging is a perfect tool and we use it often in such respect to support our partners' needs," says Zederkof.

"We make sure to guide them properly on how to handle this so it does not end up as speculation but on the contrary; a tool that limits or eliminates the risk of volatile oil prices."

Bunker prices dropped at most major global ports Friday alongside news that crude prices continued their plummet after Iran told OPEC it needs to "make space" for its increased production.