re: announcement mauritania - rager Hi Rager
I'm not saying you're wrong about what was said but I am wondering whether this is an interpretation thing over what was said. I simply do not understand what the issue is. Qantas hedges oil price by buying forward. HDR can do the opposite by selling forward. The quality has to be defined as part of the contract, but I'm sure it is not a physical settlement.
By way of example only, Qantas does not take physical delivery of oil, it simply settles a financial contract based upon the price of the same oil at maturity of its contract. The same principle applies in reverse. That is how hedge funds speculate. So, HDR could, if it wished, take out contracts to sell oil in the future based on the closest specific quality that they can find in the market. Yes, there is "basis risk", ie. that particular quality may change in value by a slightly different amount than their own oil when it comes, but in effect they have then hedged the vast majority of the price risk.
I'm happy to hear other comments on this...but I still believe there is nothing significant other than a "view" being taken by HDR that is stopping them from doing something if they want.
regards
DF
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