April 2020 crude oil demand fell to 8.0 MMb/d due to the first wave of Coronavirus, and many market analysts have started to model how the second Coronavirus wave will look like for the global crude oil market.

Since April 2020, the crude price differentials have narrowed as drivers and freight demand have jumped higher. The super contango crude spreads that we have witnessed back in May 2020 have since flattened, and forward price curves are flat and with slightly backwardation patterns. The less contango the curves usually translated to lower freight costs, and that’s good news to logistics sectors and even broader sections like eCommerce and manufacturers.

The crude market looks fairly balanced with physical and financial Brent differentials narrows based on ICE indexes at the time of this writing. However, with the United States COVID cases on the rise and WTI fluctuating between $38 and $40. It will be interesting to watch the weekly crude and petroleum inventory levels in the coming weeks.

Most market analysts already factored in a high chance of a coronavirus, the second wave hitting the global market starting as early as November 2020, peak at February 2021, and starting to recover around May 2021, which follows the same pattern as the first coronavirus first wave.

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https://www.enhelix.com/crude-oil-market-second-wave-coronavirus/

In times like COVID-19 crisis, commodity trading companies are especially susceptible wild swings of commodity prices. The companies that emerged as winners are the ones that hedged their portfolios effectively with commodity hedges.

The commodity markets are made up primarily of speculators and hedgers. While speculators are all about taking on risk in the markets to make money, the function of hedgers is to reduce their risk of losing money. A hedger is an individual or company that is involved in a business that is associated with a particular commodity, either as producers or buyers.

Hedging is simply a form of insurance. It is essentially a means of securing yourself so that in the event of those bad incidents that are part of life, the effects on your finances are greatly reduced. Hedging is not limited to the trading and investment world as it occurs every day. Take, for instance, when you take insurance on your car or house, you are hedging against unforeseen disasters that might negatively affect your house or car. Professionals and institutions in the financial market, like portfolio managers, individual investors, and corporations also use hedging techniques to reduce their exposure to various risks.

How Commodity Hedges Works?
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However, hedging in that field is not as simple as paying an insurance company a fee every year for coverage because mitigating investment risk means strategically using financial instruments or market strategies to offset the risk of adverse price movements. In this sphere of business, investors hedge one investment by making a trade-in another. Indeed, they can hedge against a plethora of things: stocks, commodity prices, currency and interest rates, among others.

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https://www.enhelix.com/commodity-hedges/