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The contract for differences (CFD) market for Urals crude is becoming more important as a risk management tool, because of wide swings in the differential between sour crudes and sweet BFO.
Traders seeking to hedge cargoes of Urals in the Mediterranean using the IPE Brent futures and BFO CFDs have experienced a rollercoaster ride in recent months. These instruments only cover the Brent-related part of the Urals price, leaving traders exposed to a significant basis risk in the Urals differential to BFO.
The differential between Urals and dated BFO has been exceptionally volatile in recent months. Assessments for Urals in the Mediterranean plummeted to an …