WTI-Brent spread volatility disrupts hedging programmes
Jet fuel prices have been tracking Brent more closely than WTI, raising questions about the hedging strategies of US airlines. Alexander Osipovich reports
The expected narrowing of the WTI-Brent spread in 2012 should help restore a measure of sanity for fuel hedging programmes at US airlines, after a year in which they were battered by a huge dislocation between the price of West Texas Intermediate crude oil and the cost of jet fuel.
Most US airlines use WTI as the basis for their fuel hedges, and historically the WTI price has closely tracked the price of Brent North Sea crude, the preferred benchmark in Europe. But in recent years, thanks to
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