“Hedges” gone bad… Here is Bloomberg (my bold):
“China’s largest oil refiner said its trading unit lost almost $700 million last year after being wrong-footed by zigzagging markets, revealing one of the biggest losses by a commodity trader in the last decade.
Sinopec blamed the losses at its Unipec unit in part on “inappropriate hedging techniques” and said it closed its positions after discovering the problem. Oil plunged sharply in late November and December, prompting traders to speculate that Unipec may have contributed to the price drop as it unwound positions.”
Remember these?
“There have been bigger oil trading busts. Metallgesellschaft AG suffered a $1.2 billion loss in 1994 when a hedging strategy failed. But it eclipses China Aviation Oil’s infamous $550 million blunder in 2004 when it fell foul of a surge in oil prices that forced it close speculative trades.”
Do read the whole thing…
Leave a Reply