Tuesday, July 16, 2024


Hedging in an Uncertain World


On the heels of the coldest winter in years, marketers face a fresh set of challenges in 2014 and 2015. Weather could go either way. Customers may or may not show renewed interest in price protection. Basis could blow out again.

To help shed some light on the uncertain months ahead, Oil & Energy reached out to hedging providers and fuel wholesalers for their thoughts on buying for the next heating season. We’d like to thank the companies that took the time to participate: Alethia Consulting Group, Angus Energy, Global Companies, Hedge Solutions, Irving, Powerhouse and Sprague Operating Resources.


QUESTION: Do you expect a resurgence in demand for heating oil price protection programs in light of the cold winter of 2013-14? How will this affect fuel marketers?

Angus: Absolutely there will be! Homeowners as well as marketers have a tendency toward “knee-jerk” reactions when hit by surprises. From what we are seeing, next year will be no different. Programs will either reenter their realm or become a more important part of it. They will need to do better planning on the timing and pricing of their offerings, the sources and pricing of their supply, and the management/hedging of their programs.

Global: I think there will certainly be more inquiries about forward contracts after this past winter. But the real question is: Will the dealer’s customers increase the demand for these programs? Many of these programs have fallen out of favor with retail customers due to the high cost of locking in a fixed or cap program.

Hedge Solutions: I think you will see a slight uptick in the participation by consumers in forward sales programs, yes. My guess would be that it comes primarily from the cap budget programs. This group typically gets all of their usage on price protection, so they received the dual benefit of protection on the excess volume they burned due to the cold weather as well as the price protection. Pre-buy or fixed price consumers have limits on the volume based on how many gallons they purchased or elected to protect.

I think fuel marketers will experience an increase in demand for price protection. That said, I don’t see anything that will break off of the charts by any means.

Irving: I believe that there will be more interest in protection programs if the market levels are low enough during the offer period (in fact interest started earlier this year). There has always been a renewed interest in the fixed price programs after a cold winter or when prices have really climbed, which usually go hand in hand. Fuel marketers will have to decide what they want to offer and make a plan that will allow them to not take too much risk and to still make a suitable margin – which can be done.

Powerhouse: Powerhouse anticipates greater interest in heating oil price protection programs. Customers have just been through a cold winter with higher usage resulting in higher bills. We believe dealers that are aggressive in promoting these programs will be rewarded. Do you know that Cap programs are now especially attractive in view of the decline in the price of options? If you have not looked at options because you believed they were too expensive, it is time to revisit. This can be a good alternative to the fixed price deal that carries the risk of buyer’s remorse if prices fall dramatically. Dealers need to remember they also get a benefit in offering a price protection program… a locked-in customer for the season.

Another thing that is working in favor of the dealer is the backwardation in the futures market. At writing, dealers can buy contracts for winter 2014-2015 at a discount to current values. This is a marketing opportunity.

The real problem facing the dealer and the customer is that the future is not knowable. In light of this reality, dealers need to commit to price protection programs in every year. This provides consistency and predictability for the customer. It demonstrates the commitment of the dealer to the customer.

Sprague: We expect demand for our price protection programs to continue to grow as marketers continue to develop their capped program offerings. Even prior to our recent colder-than-normal winter, dealers who have consistently offered capped programs, particularly capped budget programs, have seen their programs expand for a few reasons. First, capped budget customers have gotten used to knowing their maximum (“capped”) monthly budget payment in managing their expenses during tough economic times, while getting the benefit of knowing they will receive a lower price if oil markets move lower.

Second, fewer residential customers can afford one large, pre-paid amount up front. The affordable monthly payment provides the best of both worlds to the consumer: knowing that their monthly payment represents the most their budget payment will be for the year (based on a specific volume of gallons), while knowing they will get a lower price if prices move lower. Third, despite the feeling that the Nymex USLD (HO) futures contract has been volatile for the past year, it has stayed within a 60-cent range, making the cost of the capped premium more affordable. This is a win for the customer’s cash flow and a win for providing them price protection in an up or down market. This offering has been a homerun for dealers, because budgets allow the dealer to know their cash flow needs and margin in advance of delivery.

On the other hand, for fixed programs, we are seeing a reduction because most require prepayment, as full payment ensures that dealer’s customers won’t walk away if market prices go below the fixed-offer price. For dealers offering programs this season, many residential customers have used up their heating oil faster due to the colder-than-normal 2013-2014 season temperatures, and are offering programs earlier than normal. For those dealers who have not offered capped programs, or have not done so in a while, they are reconsidering the benefits as the cap premium is more reasonable than ever, and the ease of hedging the program has become easy and understandable.

Alethia: Life lessons seem to be learned the quickest when people’s hard earned money is involved. This past year created a challenge for the oil retailer as well as the consumer. Budget customers were getting more deliveries in a shorter time frame, thus creating a monetary shortfall for the retail energy company. The reason being they were not able to collect money quickly enough from monthly budget payments.

On the other side consumers were at the mercy of frigid weather as well as increased cost for their oil. Not a good combination for the retailer or consumer.

Moving forward fuel marketers should make sure they are starting budget payments early enough in case another cold winter occurs. Another recommendation would be to cap budgets so that the price does not have to be adjusted at a later point in time. Consumers are more understanding about increased usage due to cold weather but are less forgiving when their bills are increased unexpectedly. It is critical to get your customer on the right price protection program before the season starts.


QUESTION: Is basis becoming a larger factor in managing heating oil costs? What steps can dealers take to manage basis risk?

Global: Lock in their basis diffs. Global Companies offers basis deals to remove risk from basis blowouts with our basis deals, protecting the dealers from sharp basis increases.

Hedge Solutions: I don’t believe that basis risk is necessarily a larger factor. It has always been an integral component to managing exposure to risk. That risk has always been there, it just hasn’t materialized in recent years. The problem is that it usually moves big when it moves. Additionally, the mitigating factors that cause basis to amplify are extended cold weather patterns coupled with tight supplies. This means that their customers are using more oil, which opens them up to more risk on both the volume and price equations. We’ve always stressed an element of basis protection in our clients’ portfolios.

The best method for managing basis risk is through the supplier. The trick is to understand when to hedge basis and where that number should be. Finally, and most importantly, when you trigger that basis differential is hugely critical.

Irving: Yes, since the Nymex HO contract now references ULSD the heating oil basis will be an issue until all the states in the Northeast require an Ultra-Low Sulfur Heating Oil (ULSHO). Until that happens over the next several years HO basis will be moving all over the place, as we have seen this past year. In fact it will probably continue even after the change. This rapid movement affects the daily purchase of oil and any inventory held that has not been sold – the value can change several cents per gallon from day to day. That being said, a dealer should be aware of what the basis is doing and should move product in and out accordingly to minimize any potential losses, of course there can be gains that are welcome. But whether there are gains or losses, smart decisions and knowledge will keep a dealer from unwanted surprises.

The easiest way for dealers to manage the basis risk on forward sales is to make sure they have it covered by buying fixed price product from a supplier (as the fixed price would eliminate their basis risk). If a dealer has Nymex paper positions with a broker to protect the fixed product or even have options for downside protection covering a Nymex position they have to realize that they still have basis risk. Because of the wild basis swings we offer a share of the basis savings if it swings lower than expected average levels, which quite often will happen during the winter shoulder months.

Powerhouse: Northeast heating oil dealers had been through several years of relatively calm basis. Changing specifications for heating oil throughout the Northeast, a reduction in inventory as suppliers responded to the changing specs, and a very cold winter were a perfect storm for basis this winter. We expect basis to normalize as more states adopt the ultra low sulfur specification for home heating oil.

Futures contracts are available to hedge basis. These contracts protect the diff at New York Harbor. They can be helpful in offsetting an increase of basis at the rack. Powerhouse brokers these contracts. Some of our customers buy fuel though an EFP. Basis is negotiated as part of the transaction, sometimes months in advance.

Dealers need to consider why they are controlling basis. Are you offering a fixed price or a cap? If not, is it something you want to do? There is a tendency in the industry to fight last year’s battle. Remember, basis can also fall. Powerhouse monitors basis and makes recommendations based on factors such as historical patterns and the current inventory situation.

Sprague: Basis has become a larger factor in managing heating oil costs, as distillate inventories have been tighter for a number of reasons. First, refiners have been incentivized to export more distillate and gasoline products, to the tune of 20 percent this season. As long as the Brent-WTI spread or “arb” stays healthy, domestic crude is being refined into petroleum products destined outside the borders of the United States.

Second, because there has been little-to-no “carry” in the market (future prices are more expensive than current prices) for the past few years, there is no incentive for suppliers to store excess product.

Third, when distillate inventories are tight, and cold temperatures increase heating demand, creating even more need for supplies, basis increases as a premium is placed upon the price of physical heating oil or ultra-low sulfur diesel (ULSD) above the cost of the current Nymex ULSD (HO) contract.

Currently, East Coast (PADD 1) distillate stocks are 43 percent lower than the 5-year average, and 18 percent lower than last year. Dealers can manage this by locking in a certain percent of their rack gallons with a fixed diff supply agreement, or unpriced guaranteed differential product with their supplier. On the program side, any wet barrel or forward purchase includes basis protection (fixed differential), and with Sprague, our cap programs include basis protection as well.

Alethia: Basis is always an important consideration when planning a hedging program long term as well as for daily purchasing requirements. Since every wholesale supplier has a different SG&A (Selling, General and Administrative Expenses) their replacement cost is adjusted daily, thus every single day basis changes for them. Sometimes it is advantageous for a wholesaler to be aggressive with their basis because they need to make room for cargoes or barges coming in. Other times basis may increase since they need to keep their racks wet in order to fulfill contract obligations with retail customers. In order to manage basis risk bulk purchasing, online ordering, fixed forwards and basis spreads should be implemented in order to reduce one’s exposure to a basis increase.

Angus: It has become a much larger factor, though likely exaggerated this past winter. Even without the exaggerated impact of this past winter, the challenges of different products and pipeline constraints in the Northeast will make this something to be dealt with for years to come. There are a number of approaches such as: fixed-differential supply deals, basis-differential trading/hedging, as well as NYH indexed supply. What they should not do is ignore the reality and be upset as the basis continues to gyrate.


QUESTION: Do you expect basis spikes to be an ongoing issue? Could they get worse? If so, why?

Irving: The basis spikes will definitely be an ongoing issue and most likely will get worse in the future. So far this winter season we have seen the basis on heating oil swing around 30 cents per gallon (from high to low). Inventories are now kept quite low and that can drive the prices as well as the basis upward. This fact of inventories being kept low will drive the basis up when the weather is cold like this year or there are any supply disruptions. I believe the basis swings (and spikes) are the new normal in the petroleum business.

Powerhouse: All hedgers face basis risk. This is true for all commodities. As mentioned above, we believe that as the Northeast moves to a more standardized heating oil specification, basis will normalize. Spikes – or their opposite – are always a concern. They reflect that which is going on in local markets. Refinery glitches, transportation issues, and local regulatory concerns are always problematic. Increasing exports and the corresponding reduction in imports are new factors in the market and bear watching. The trend of refiners to maximize distillate output could be a mitigating factor to future basis spikes.

Sprague: As long as incentives for exports continue and we lack a “carry” in the market, suppliers will be managing tighter supplies. Through December 2013, Russian heating oil imports had been an important part of supplying the East Coast (PADD 1). For example, if geo-political factors limit access to certain imports, such as talk of economic sanctions upon Russia for its invasion of Ukraine’s Crimean region, along with another cold winter, basis could blow out again as it did during January. Basis will have to be managed in advance of the upcoming season.

Alethia: The new contract spec on the Nymex, as well as states now mandating low sulfur heating oil, has created an increase recently of basis problems. Until we have a more uniform product specification from multiple states around the country then we will be susceptible to ongoing basis challenges.

Angus: The fear of the spikes will most certainly be an issue. They absolutely can get worse. For example, if this past winter’s “perfect storm” of weather, supply differences, pipeline constraints, and availability of trucking were to repeat itself, it could be even worse. Should we expect that? Perhaps not. However you need to plan realistically.

Global: There’s always the risk of a basis blowout. We’ve been lucky the past several years that there haven’t been any really to speak of. I think that’s due to mild winters and flat prices staying steady over the last several seasons.

Hedge Solutions: It depends mostly on the weather factor, but, yes, I think you will see basis spikes over the next several years or at least until the industry moves to a ubiquitous grade of fuel, ULSD. Meanwhile, cold weather in a timely fashion will produce basis spikes due mainly to the lack of a consistent grade of product throughout PADD I. It will likely get “riskier” as the various states that make up the majority of heating oil customers move toward some version of a lower sulfur content mandate for that oil, but just short of a ULSD mandate. New York moved first to ULSD just two years ago, but the other states have yet to follow.


QUESTION: The cold winter of 2013-14 is a marked change from the warmer winters of recent years. Do you recommend that marketers prepare for a wide range of temperature scenarios for 2014-15?

Sprague: Given the stark difference in degree days this winter versus last, we recommend that marketers prepare for a wide range of temperature scenarios for 2014-15. Heating oil dealers have to be prepared every season for extreme variables. Fixed differential supply agreements, index-based supply agreements, and access to forward contracts, prompts, and programs that have built in basis agreements and coverage will be critical for this upcoming season. Dealers who maintain fantastic credit and payment history with suppliers and banks will have the most choices and access to supply.

Alethia: Weather and price are two variables that need to be considered when hedging. The possible scenarios are warm weather/low prices, warm weather/high prices, cold weather/low prices, cold weather/high prices. Given these potential scenarios it is wise to take a conservative approach and not speculate on what you feel could happen. For example just hedging a percentage of program gallons sold can be devastating in a season like the one we just had. Hedging for weather is a component that is often overlooked but shouldn’t be. In the end a cost benefit analysis needs to be performed in order to determine what combination of price and weather hedging should be implemented based on an energy dealer’s risk tolerance.

Angus: Marketers must always be prepared for the unknown, and weather uncertainty should be one of the foremost considerations when putting together a plan as a heating fuels dealer.

Global: Dealers should be hedging their risks every year. Due to the very nature of our business, the days of “winging it” should be over forever. Dealers should prepare hedging programs expecting the worst case scenarios, but hoping for the best. Global Companies has many programs available to help dealers reduce risk.

Hedge Solutions: There have always been seemingly dramatic swings in winter temperatures from one year to another so yes, it makes sense to cover that scenario. How you do that is the ultimate challenge. I’m not quite sold on weather derivatives. In our analysis we have yet to find them useful as a viable economic hedge. That’s not to say that they won’t make sense in the future as, like any commodity, increased liquidity makes it a more competitive option.

Irving: We all have to prepare to cover any of the scenarios for varying temperatures. Forecasting for needs during the winter months is becoming a serious part of supply chain management and perfecting it is a goal all marketers should work toward. Making big adjustments during the winter season are difficult and preparing for the warmest or coldest winter is always going to be a challenge for all marketers.

Powerhouse: No normal is the new normal. Winters are variable. Dealers must take this into their planning going forward. Weather hedges are available. Some dealers purchase out of the money calls to provide protection if a cold winter pushes demand and prices higher together.


QUESTION: How can marketers keep hedging costs under control while adapting their hedging strategies to cover all their temperature-related risks?

Hedge Solutions: Stop the smoke and mirrors! There are very few options short of making the necessary margin and passing on the premium risk to the customer. You simply can’t insure every single facet of risk in the energy market; weather, price, basis, snow related overhead costs, ice, bad road conditions, etc. Certainly not in an economic fashion.

Irving: Hedging costs can be controlled by planning and using all the tools available. Learning what tools are available and how to use them is the best approach. This can take time to learn over the years and using the wrong tool for the job can be like using the back end of your screwdriver as a hammer. If you are a large marketer, controlled hedging can save you enough money to pay someone to work your hedge strategies, and if you are a small company you need to work closely with a trusted supplier and learn as much as you can to save money. The tools include such items as buying fixed priced product; supply contracts; using weather options that are available that can help with finances for either a warmer or colder winter; the timing of buying and selling; downside protection with options; etc.

Powerhouse: The more precise the hedge, the more the hedge will cost. This is true of any insurance. That does not mean insurance is a bad idea. Concerns for a winter with more degree days may be handled less expensively with out-of-the-money call options. These kick in when colder weather leads to higher prices. If higher weather does not lead to higher cost, the option expires with no further obligation to the dealer. There are also weather derivatives that recognize temperature impacts on volume. The weather derivatives add cost. That said, in a warm winter they can make a difference. We help dealers evaluate their alternatives to optimize their own situation.

Sprague: Marketers keep hedging costs under control while adapting their hedging strategies to cover all their temperature-related risks by offering cap programs, advising their customers to increase their volume commitment, and having their customers pay for the premium up front. Recently, more dealers are also including the premium in the budget payment or as the first payment that is non-refundable. Cost of hedging the premium can be reduced by buying “out of the money” coverage that is cheaper than “at the money” coverage. For non-program gallons, weather insurance is available, but will most likely be expensive coming off of a cold season this past year.

Alethia: This is a vital question and it is one that turns numerous companies away from offering a properly hedged price protection program. When you buy a wireless plan, the carrier probably doesn’t charge you the full retail price of a smartphone. Instead of charging $650 they charge $199 because the market research has shown that the majority of customers will spend $199 for a smartphone. Similarly it is important to charge a reasonable rate for price protection, but if you charge the full amount then be prepared to have less volume sold. (The past few years have been much easier to collect the full hedging cost up front.) It is easier to recoup hedging costs of .25/gallon than it is to charge the full cost to the customer. The challenging part to controlling hedging expenses occurs when hedging costs balloon to 40+ cents per gallon. It is vital to create a consistent price to your customers year in and year out. Remember: 1. Either you charge the full price of hedging every year; 2. subsidize a portion yourself; or, 3. give the price protection away for free. (The last option is not recommended.) Lastly an important factor to consider is that there are two variables: First is the cost charged for the price protection, and second is the actual price for the oil. For example if you need to charge 30 cents to cover your hedging expenses then you could charge 20 cents/gallon (or flat fee $200) but the capped price must be $3.10 instead of $3.00 for 30 cents.

Angus: “Under control” is a relative term. There are weather-contingent options, HDD transactions, as well as the possibility of diversifying the supply mix to add in more “flat load” sales. As with all hedges you look to transfer risk to someone willing to assume it, and in all cases (as with any kind of “insurance”) protection will come at a cost. Our strong suggestion is to not ignore the risk, but not to exaggerate the risk either. Speak with a professional while you are making your plans

Global: Hedging costs should be incorporated in the price they are charging customers, period. Global Companies work with our customers to adopt a hedging strategy for each dealer’s comfort level, balancing risk vs. program costs.


QUESTION: How has the Nymex specification switch from HO to ULSD affected hedging? What are your expectations going forward as more states transition to 500 ppm and 15 ppm heating oil?

Alethia: I am optimistic that this will be very positive for the energy marketer moving forward. Gasoline is a good example of what regulators should attempt to avoid when making legislative decisions on heating oil specifications. We have so many different specs of gasoline across the United States that it is quite difficult to keep the country well supplied consistently. As more states approve low sulfur heating oil mandates, the result will be more consistent supply with fewer basis problems. One reason is this will enable more wholesalers to compete on a more level playing field, since they won’t be handicapped if they do not have blending capabilities. In the past any wholesale supplier who owned storage could procure lesser grade heating oil and then blend it to meet minimum spec. This meant independent suppliers who did not own storage tanks were not on a level playing field, thus they could not compete at various times throughout the year.

Angus: It has absolutely impacted hedging. The basis-differential needs to be accounted for, and we focused much of our preseason attention on the price difference between HO and ULSD. Many clients (outside of the state of NY) put on hedge positions to mitigate changes in the differential. Please note that regardless, the best hedged companies still suffered somewhat from certain types of basis blowouts, specifically related to the widening of the spread between the Harbor postings and the local rack prices. Perhaps some suppliers grabbed some extra margin? You might want to ask them!

Over time the basis differential between HO and ULSD will become of less consequence for the 500 ppm states starting July of 2014. The basis exposure (at the NYH) should drop by about 75 percent. Notwithstanding, there is still a major concern for basis differential, both on the 500 ppm as well as the ULSD, and the impact of that potential needs to be factored into your programs and budget.

Global: It really affected the market for forward contracts last summer and fall. I feel the industry has now “cut their teeth” this past winter and more consistent forward markets will follow for the coming winter and beyond. But, with that being said, it is very hard to predict what will happen in the future.

Hedge Solutions: The switch caused a lot of uncertainty and confusion last year, particularly around the basis issues. Most rack markets saw a significant increase from the summer basis (the delta between the local rack and the spot Nymex contract) and winter basis. Additionally, the dealers found it difficult to gauge what they should be paying for a wet barrel adder, or differential, from their supplier. As I stated earlier, I think you will see more risk and confusion over basis values until the industry finally settles on one grade of fuel, ULSD.

Irving: The biggest affect to hedging has been on the assumptions of what basis will be. When a supplier sells a forward fixed price contract for HO they have to make calculations and come up with where they think the basis will be when the product is actually bought and when it is delivered to the dealer. As we expected and have seen, the basis has gone wild this winter. So hedging itself has not really changed, but the basis related to the hedging has gotten harder to forecast. I expect as the states transition, heating oil hedging and pricing will continue to get harder. Product will be different in neighboring towns at the state borders. Until the states have all changed to the same product there will be more confusion and uncertainty and pricing will vary. It is too bad the whole Northeast could not transition at the same time!

Powerhouse: Specification changes always breed uncertainty. This was the same with the change to RBOB from reformulated gasoline. The changing state specifications and the switch to ULSD in the hedging instrument caused some suppliers to stop offering fixed price sales to dealers this winter. This also had many dealers wondering what to expect as a basis differential. It is hard to remember that we started the winter with a 10 cent discount for high sulfur HO in many markets, well below historical diffs.

We now have the first winter under our belts with a ULSD futures contract specification. More states are adopting lower sulfur specs for home heat. Suppliers are now more comfortable offing fixed price and basis deals to dealers. All of this should reduce basis uncertainty.

Sprague: Like the state of New York that has switched to 15 ppm ultra-low sulfur heating oil (ULSHO), they now are able to hedge this physical product with the same underlying 15ppm underlying Nymex ULSD (HO) futures contract. Because most refineries are currently slated to refine 15ppm sulfur heating oil, it is difficult to know the availability of 500ppm material. Therefore, it is more likely, that states requiring 500ppm heating oil will actually be supplied with 15ppm ULSHO that will be hedged directly against the current underlying Nymex ULSD (HO) contract. As the expectation for this heating season for any remaining states allowing the high sulfur heating oil, hedging this product was thought to be at a significant “discount” to the Nymex ULSD (HO) contract. However, as we saw this past heating season, with fewer and fewer states allowing high sulfur heating oil, there are now fewer refiners that actually refine high sulfur heating oil. Therefore, it has become more difficult to source the higher sulfur material, and that fact has resulted in pricing that is closer to ULSHO. It is very likely this trend will continue into the 2014-2015 heating season.


QUESTION: If you offer hedging for propane, please briefly describe your services.

Alethia: Propane hedging tools consist of swaps, calls, puts, collars. Any volume over any time frame.

Angus: We do offer hedges for propane. Primarily swaps and options indexed to Mt. Belvieu or Conway. We also work with several distributors that have expertise in managing the “further downstream” supply and storage requirements.

Global: We currently offer our customers both index based price and fixed priced products for propane. Also we work with each of customers on an individual basis to offer pricing that best suits their risk profile. As our business and trading desk matures, we expect to offer a full menu of hedging solutions.

Hedge Solutions: Hedge Solutions’ primary mission is to develop both hedging and procurement strategies for heating oil, diesel, and propane distributors. We like to put a large emphasis on the procurement side, since much of the industry tends to think of us as the “hedging experts,” when in fact we spend just as much time and effort with our clients on showing them a better method for buying product day to day that results in an increase in their margins.

Powerhouse: Powerhouse is a major provider of exchange-cleared propane futures and options. We handle futures contracts at Mt. Belvieu and Conway, KS. We also handle options at these locations.


QUESTION: Please describe any new products, programs or services you are offering for 2014.

Alethia: Hedging tools offered for heating oil, diesel fuel, gasoline, and propane are call options, put options, swaps, collars, and weather options. Any volume any time frame, heat curve, even volume, odd volume. Capped price hedging, fixed price hedging, rack plus hedging, weather hedging. Fully customizable to the energy company’s requirements.

Global: Fixed priced contracts, prompt contracts, HDD (heating degree day) deals, spread deals, basis deals. Traditional put and call options, average price put and call options, collars and of course our online buying platform PetroHub. Global Companies prides itself on customer service. Each one of our Territory Managers, work personally with their customers to design a customized hedging plan for their risk management needs.

Hedge Solutions: As a consulting company, we are always completely focused on our client as their neutral, objective advocate. We don’t invent new products; we assess both the old, current, and new products that are propped in front of them every year. We are hired because our agenda is simple and straightforward: Improve our clients’ profitability by identifying opportunities in the marketplace. We do use certain tools that have provided distinct advantages for our clients in managing their hedging and improving their margins. HedgeInsite (powered by Progress) and MarginTrak have both become intrinsic to our relationship with our clients as well as indispensable to them.

Irving: We plan to continue to meet our NavDesk customer needs by improving our systems and offerings to include the following:

  • We will now be marketing forward contracts with purchases as small as 1,000 gallons through our online (eNavDesk) platform.
  • We will now be providing increased flexibility to our prompt customers, as we will no longer require minimum quantities on prompts purchased through the eNavDesk.
  • We plan to continue our successful Heating Oil Basis Opportunity Program.

Beyond this, our plan is to continue marketing our standard prompt and forward offerings along with providing top notch customer service.

Powerhouse: Powerhouse has provided brokerage services on all exchange-cleared energy contracts for many years. Since we were established as an independent company, we have added many new services to our offerings. We are now providing guidance on how best to market and track new product offerings. We are also helping companies expand their own product offerings, including custom-sized contracts.

Sprague: Sprague offers the full gamut of programs to cover fixed and capped priced programs that can be customized to a small volume heat curve and have built-in basis protection. We look forward to helping fuel dealers with protecting basis and provide a convenient one-stop shop for all of their fuel and fuel management needs.


EDITOR’S NOTE: Sprague attached the following notice to the content it contributed for this article: These responses are provided for informational purposes only and are not intended as advice on any transaction nor is it a solicitation to buy or sell commodities. Sprague makes no representations or warranties with respect to the contents of such information, including, without limitation, its accuracy and completeness, and Sprague shall not be responsible for the consequence of reliance upon any opinions, statements, projections and analyses presented herein or for any omission or error in fact.


Contacting the Contributors


Aletheia Consulting Group
Mark Skaparas
Phone: 508-721-7604
Fax: 508-721-7605


Angus Energy
Philip Baratz
Phone: (954) 564-7500
Toll free: (800) 440-0472
Fax: (954) 564-7045


Global Companies
Bill Braunig
Wholesale Risk Manager
Office: 781-398-4318
Cell: 508-769-6049
E-Mail: bbraunig@globalp.com
Twitter: @billbraunig


Hedge Solutions
Adam Larkin
Phone: 800-709-2949
E-mail: alarkin@hedgesolutions.com
Cell phone: 603-785-2321
Fax: 1-603-644-7883


NavDesk Team
Phone: 1-877-942-3600
E-mail: navdesk@irvingoil.com
Fax: (603) 559-8793


Alan Levine, Chairman
Elaine Levin, President
David Thompson, CMT Executive Vice President
Phone: (202) 333-5380
E-mail: contact@powerhouseTL.com


Sprague Operating Resources LLC
Kris Magnusson
Manager, Program Development
Phone: 603-430-5367
Cell: 603-770-3822
Toll Free: 800-225-1560 x205367
Email: kmagnusson@spragueenergy.com
Yahoo! IM: krismagnusson


Hedging, Banking and Credit
April 2014

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