Weathering oil risk
Managing weather risk is increasingly important for petroleum companies. Murad Jivraj looks at how optimal oil risk management can be obtained through combining traditional structured products with new weather derivatives
Managing the risk associated with physical crude oil and refined products is more important than ever, given today's high and volatile prices. To achieve optimal risk management, addressing weather risk is essential.
Amongst all the complexities and eccentricities of the oil markets – from Opec production constraints, to freight risk and refinery heterogeneity, to illogical pricing and uncertain demand – there is one factor which often dictates rather logically the use of energy – the weather.
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