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Danish risk management specialist A/S Global Risk Management has revealed that it has seen a rapid rise in the number oil suppliers looking to hedge oil price risk, which has contributed towards a 32 percent rise in hedging volume during the second quarter of 2010.

“The increase we have seen in Q2 2010 compared to same quarter last year is primarily driven by an increase in volumes with oil suppliers”, said Jan Knudsen [pictured], Executive Sales Director at Global Risk Management.

“We have traded with oil suppliers for many years, but recently we have experienced an increasing number of oil suppliers wishing to manage oil price fluctuations,” Knudsen added.

Global Risk points out that the typical risk oil suppliers face is the time difference between buying a cargo and selling the product again in the bunker market. The longer the time it takes to sell the product, the greater the risk of declining prices. However, with fuel price risk management, also known as hedging, Global Risk points out that there is a way to address the issue.

Knudsen said: “Through our experience we have learned that suppliers operate in very different ways and require unique solutions in order to mitigate the risks in their operation. We have specialised in offering customised solutions. For example, we offer broken dates instead of only full month. We work with the supplier to determine which solution matches his specific needs whether that would be selling the full month average of a certain Platts quote or the purchase of just three specific dates”.

Commenting on the issue of oil price risk, Morten Groenbech Terp, Oil Risk Manager said “We are aware that nothing is static in the oil business and will work with the supplier to change the hedge should it happen that different circumstances affect the sale of the products and thus creates a mismatch between the hedge and the operational business."

Terp commented that customized tools such as Swaps with broken dates were particularly popular at the moment, adding: “Suppliers are learning to turn volatility into opportunity”.