Airlines start pre-emptive hedging over 2020 deadline

Airlines are starting to hedge against the risk that fuel prices could be driven higher by rules targeting another industry’s environmental performance. Brent crude for 2020 rallied in Q3, a period in which spot prices fell, as some carriers began seeking protection against higher fuel costs caused by rules to cut sulphur emissions from ships. The regulations, set out by the International Maritime Organisation, take effect in Jan 2020. The 2020 rules will force the world’s maritime fleet to use fuel containing less sulphur. The requirement to switch has created a widespread expectation that there will be an initial demand surge for diesel-like products. A critical question for airlines is whether oil refineries will cut output of jet fuel as they try meet the surge in buying from shippers. <br/>