Airlines have started to stock up on cheap fuel


In the oil market sharply increased the demand for long-term futures for delivery of Brent and WTI at the end of the 2017, 2018 and even 2019-second period, according to Reuters.

According to the source Agency, buying futures resumed airline trying to hedge against the rising fuel prices ahead of the meeting of representatives of the largest countries — exporters of oil, which is expected to be a decision made about the freezing of oil production.

According to the Vice-President of Mercatus Energy Steve Sinos, large consumers of fuel do not expect that oil prices will continue to go down. The return on the oil market of large buyers such as airlines, led to growth of sales of long-term futures to amounts not witnessed since the second half of 2014.

According to Depository Trust & Clearing Corp., last week volume of deals with long-term oil futures of approximately one-third exceeded the volume of transactions recorded a week earlier.

Earlier it was reported that at the end of March 2016 the difference between the number of open long and short positions (essentially bets on the rise and fall of prices) in the three main oil benchmarks — futures/options on WTI on the new York Mercantile exchange (NYMEX) and the Intercontinental Exchange (ICE), as well as futures/options on ICE Brent reached a 17-month high.

However, Reuters notes that when last year the oil price has stabilized at $60 per barrel, fearing that the more fuel will only go up, airlines are already trying to insure themselves by buying long term futures. As a result many of them suffered serious losses — the market price of oil fell and were much lower than recorded in futures transactions. After the price of a barrel fell to $30, Southwest Airlines was forced to recognize losses of about $1.8 billion.