Risk management advice for flexible contracts – Y report

Customers on flexible price contracts with low hedges should take a bit of risk management, according to Inenco’s Y report. Dorian Lucas, Energy Analyst said: “If you are relatively lowly hedged […]

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By Jacqueline Echevarria

Customers on flexible price contracts with low hedges should take a bit of risk management, according to Inenco’s Y report.

Dorian Lucas, Energy Analyst said: “If you are relatively lowly hedged there’s definitely some advantages in taking some because going further into the winter there’s obviously increased risk over supply shortages or maintenance on different outages that could push prices up in the short term. So if you’re lowly hedged you might want to take a little bit of risk management.”

On the other hand customers looking to place a flexible contract with high hedges don’t have “any real benefit in taking any more at the moment” as there’s potential for losses later in the season and closer to delivery.

 

For customers on fixed price contracts “the key thing is the appetite for risk”, added Mr Lucas.

He said: “If you look at the history of the market, it is still relatively at the bottom of the market close to those historic lows. However there is still scope for further losses.

“If you’re looking at prices now and seen a year on year benefit in fixing now and you want that price certainty then I’d recommend for you to enter the market now. However if you’ve got a bit more of a free attitude to risk and prepared to maybe wait a little bit and see prices fall a bit further, there’s still scope for losses.”