OTC (Over-the-counter) commodities

 

OTC commodities derivatives are designed for medium and long term financial risk management. OTC Energy Swaps are used for commodities market price risk management. Contact us to learn how we can help your business!

OTC commodities

OTC Energy Swaps are increasingly used because they are one of few financial instruments suitable for long term management of price risks. The most active and important players on commodities swaps market are banks and trading companies, whose activities are related to oil production and refining. Swap-dealers, having extensive experience with currency and interest rate swaps, are also becoming more active with commodities swaps. Dealers, as a rule, act as intermediaries: they don’t conclude unilateral transactions to speculate on prices dynamics. After conclusion of a swap agreement, dealers prefer to eliminate their own risks by conclusion of an opposite swap with another counterparty or by using the futures rolling strategy. Only few banks and companies (BP, Elf, Shell, Total and some others) used to conclude unilateral transactions to speculate on prices dynamics.

OTC Energy Swaps are purely financial instruments that allow exchanging the cash flows, fixed in the contract, after certain time intervals. Using swaps, commodity producers can fix the amount of money that they will receive for their production. Vice versa, commodity consumers can fix the amount of money that they pay for commodities. Producers and consumers continue to sell and buy commodities through the traditional channels at the market prices, but unfavorable price movements are compensated by swap contracts payments. Because it is a purely financial transaction, commodity swap allows both producers and consumers to hedge price risks, without direct influence on commodities production, purchases and sales. Many producers use swaps mainly for easier access to investments and credits.

Commodity market instruments

Renesource Capital customers have access to wide selection of instruments for commodity markets risks hedging

Crude oil and petroleum products

  • WTI NYMEX;
  • ICE BRENT;
  • ICE GASOIL;
  • Diesel oil;
  • Gasoline;
  • Propane/Butane;
  • Naphtha  (straight run gasoline);
  • Bunker fuel;
  • Mazut;
  • Ethanol/Biofuel.
 

Agricultural commodities

  • Cotton;
  • Rapeseed;
  • Coffee;
  • Cocoa;
  • Sugar;
  • Corn;
  • Soybeans;
  • Wheat.
 

Metals

  • Iron ore;
  • Nickel;
  • Copper;
  • Aluminum;
  • Zinc;
  • Lead;
  • Palladium;
  • Aluminum alloy;
  • Tin;
  • Steel;
  • Cobalt;
  • Molybdenum.

Coal and coke

  • API 2 index;
  • API 4 index;
  • CFR China index;
  • Indonesian Coal (FOB Indonesia).
 

Natural gas

  • NBP (UK);
  • NCG (DE);
  • Gaspool (DE);
  • PEG (FR);
 

Freight

  • Very Large Crude Carrier (VLCC);
  • Suezmax class tankers;
  • Aframax class tankers.

 

Risk Disclosure Statement. Margin transactions (Forex, contracts for difference CFD, futures and futures options, stock options, REPO transactions, transactions in over-the-counter derivatives and transactions using broker credit, including selling short) involve higher risk. The level of risk increases with the leverage ratio. As the result of margin transactions, relatively high profits are possible with low level of initial investments, as well as significant losses which may exceed the principal amount of investments or the amount of the collateral. Please ascertain whether margin transactions in their essence and content suit the risk profile that was assigned to you by AS IBS Renesource Capital and whether the content of margin transactions corresponds to your investment goals.