Without further ado, the following are our answers to your May energy hedging questions.  As always, if you would like us to provide more depth or breadth to any of our answers or if you would like to ask a question for next month’s Q&A, please let us know.  Comments below are more than welcome as well.

We've heard that CME/NYMEX is going to delist the heating oil futures contract, is this correct?

Yes, February 2013 is currently the last month for NYMEX heating oil futures and options.  In the coming months, CME/NYMEX is going to be announcing the finer details, at which time we will be writing a comprehensive white paper on the transition, but in short, New York Harbor heating oil futures and options are going to be replaced with New York Harbor ultra-low sulfur diesel (ULSD) futures and options. 

What is a WTI crude oil calendar swap?

A WTI calendar swap is a financial swap that settles against the arithmetic average of the NYMEX WTI crude oil futures first nearby contract settlement price for each business day that it is determined during the contract month.  As an example, a June 2011 WTI calendar swap would settle against the July WTI futures for each business day from June 1st - 21st (the July WTI futures expire on June 21st) and against the August WTI futures for each business day from June 22nd - 30th.

How can we hedge our exposure to rising fuel prices in England?  Generally speaking, most companies in western Europe hedge their fuel exposure with Gasoil swaps, futures or options.  Gasoil futures and options are traded on ICE, while gasoil swaps and options are traded in the OTC (over-the-counter) market.  As an consumer of fuel you would want to consider purchasing gasoil swaps or futures, call options on gasoil swaps or futures or perhaps entering into a costless collar (buying a call option and selling a put option) on gasoil.

If you'd like to ask a question for our June energy hedging Q&A please leave a comment or send us an email.