OTC Energy Swaps — Over The Counter financial instruments for the short-term and mid-term financial risk management. OTC Energy Swaps are used for commodity price risk management

OTC Energy Swaps are used more frequently due to being one of the few tools which were suitable for price risk long-term management. The banks and the trading companies work particularly hard in the swap markets, the occupation of which is connected with petroleum mining and processing (they still remain to be the main players in the field of commodity swaps market). Gradually, the swap-dealers became actively engaged in commodity swaps, having broad experience in working with currency and interest-bearing swaps. The dealers, generally, stand as the mediators, they do not make unilateral deals to be able to speculate in the price dynamics. After completing the agreement, dealers aspire to eliminate their own risks completely by completing the opposite (mirror-like) swap with another counteragent or using the strategy of exchange traded futures rolling. Only few of them (BP, Elf, Shell, Total and some more) open the positions to speculate on price movements.

OTC Energy Swaps — is a particularly financial tool that lets exchange the money flows, which are fixed in the contract, in specific periods of time. With the help of swaps, producers of the raw material commodities may set the amount of money which they receive for their production. The commodities consumers, on the contrary, may set the sum of money which they pay for the raw materials. The producers and consumers continue to realize or purchase the raw materials through the traditional channels according to the market-price, the unbeneficial change of which will be compensated by the payments from the swap contracts. The commodity swap is a purely financial deal, therefore, it lets both, producers and consumers, hedge the price risks without directly influencing the raw material production, purchasing and selling. Many producers use the swaps mainly for making the access to investments or credits easier.

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