Shanghai Petroleum Exchange starts operation

Shanghai Petroleum Exchange, China's first bourse for the spot transaction of oil products, has formally opened. The exchange began trading in gasoline and will trade bitumen, methanol and glycol in the near future. The exchange will launch trading in other petroleum and chemical products in the future, including crude and refined oil and liquefied gas.

The exchange has reached deals with 65 traders, at least 10 warehouses and two banks. The Ministry of Commerce said in a congratulatory letter the inauguration of the exchange is an important move to strengthen China's petroleum market.

(2006-08-21 19:20:03 SGT) [Energy] Permalink

JAL to raise fuel levies, cut flights

business-times.asia1.com.sg :

Japan Airlines Corp (JAL), reeling from two years of losses in three, plans to raise fuel surcharges and reduce its flights to Chicago and Manila, as it tries to return to profit. President Haruka Nishimatsu is trying to boost earnings this fiscal year by cutting employees' wages and passing on increased fuel costs to passengers.

JAL also said it applied to the ministry to raise surcharges on some international routes by between 700 yen (S$9.50) and 5,600 yen (S$76.15). The airline has hedged 35% of its fuel needed for the year starting April 2007, less than the 75% ratio for the current fiscal year.

Qantas profit falls 30% on higher fuel costs

business-times.asia1.com.sg :

Qantas Airways said annual profit fell 30% on higher fuel and redundancy costs and said it planned to slash more jobs, including more than 1,000 management and support staff. Chief executive Geoff Dixon said much of the savings Qantas would make over the next two years must come from labour costs. The airline, which has around 37,000 staff, retrenched 1,245 staff last year.

Qantas said its fuel costs rose 45% to A$2.8 billion. Like many other carriers, Qantas has introduced fuel surcharges to help offset rising fuel costs. Chief financial officer Peter Gregg said the company had increased its fuel hedging to 70% of its expected fuel needs for fiscal 2007 at A$70 a barrel. In June, it had contracts for around 50% of its expected fuel needs. It had A$282 million in hedging benefits last year.

- Hedging works but only to a certain extent. When it comes time to renew those contracts, it might well be at a much higher price (see below for earlier story). Also, I have been told that the duration of these hedging contracts have been getting shorter, eg instead of allowing hedging at a certain price for 3 years, the seller may only allow the buyer to hedge ahead for 1 year.

See also :

1. Qantas hedges 100% of fuel costs

(2006-08-21 12:47:05 SGT) [Biz] Permalink

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