Higher transport costs drive demand for derivatives

Oil tanker freight rates have been driven higher this year by the same forces driving crude oil prices—strong global demand. At the same time, ship charterers and oil traders are using the derivatives market to reduce their exposure to these extreme and highly volatile freight levels.With the price of oil at 30-year highs, an extra 5-10% added for transportation can be very expensive. But as costly as the freight portion may be, moving millions of barrels of crude from producer to consumer by ship is usually the only option. Increasingly, charterers who hire ships on a regular basis for a single voyage or longer periods are using the derivatives market to reduce their exposure to ri...

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