Problems And Solutions Of Using Derivatives In L Crude Oil Trading Company

Petrochemical energy has become the key to the economic development of a country,while the world economy is gradually integrating developing.The rapid development and effective operation of China's economy can not be separated from the promotion of petrochemical energy.As a major energy producer and consumer,the supply and demand of China's domestic energy is quite unbalanced due to the uneven resources.Since China became a net importer of refined oil in 1993,the import volume has been rising continuously.In 2017,China imported 8.4 million barrels of crude oil,making it the world's largest oil importer.At present,the proportion of dependence in imports of China's petroleum products is higher than 50%.The fluctuations in international oil prices are more linked to the market and the economy.The oil market is a combination of spot and financial derivatives,and its financial attributes are also becoming more active as speculative transactions become more active.During the period from 1970 to1979,two oil crises occurred in the world,causing sharp fluctuations in crude oil prices and a huge negative impact on the economy.In such an environment,the market has a strong demand on price hedging.To safeguard their own benefits,Western countries headed by the United Kingdom and the United States have participated in the crude oil futures market in order to seek the pricing power of crude oil.As the financial property of crude oil continues to increase,the interaction between its futures price and spot price is increasing,and a pricing system based on crude oil futures price is added.The crude oil futures have also become a hedge for many petroleum and petrochemical enterprises.An effective financial instrument for maintaining value.While following the footsteps of market development,China's oil trading companies are also constantly expanding into foreign markets.In addition to increasing the establishment of gas stations and oil depots at home and abroad,as well as producing and operating other oil products and petrochemical products,China is also constantly striving to increase the quota operation of imported refined oil and fuel oil,and is involved in a wide range of business operations.However,the dependence of large oil companies on foreign countries is still as high as 60%,and they have to rely on a large number of oil imports to maintain the development of enterprises.Uncertainty in oil price volatility may cause dealers and related companies to reduce purchases,thereby affecting the efficiency of upstream and downstream enterprises in the petroleum industry chain.However,in addition to the general commodity attributes,oil also has the attributes of strategic materials.To a large extent,its price and supply will be affected by the political power and political situation between countries,especially the oil-producingcountries.With the frequent fluctuations in the world economy in recent years,the international trade war situation has become increasingly severe.The geopolitical risks of the United States on Iran,the oil-producing country,and the political and military crisis in Libya,have continuously affected the trend of international oil import and export prices,and their growth rate has also become more frequent and intense.This has a huge impact on China's economy and the production and operation of domestic oil production and trading enterprises.Enterprises not only face a series of operational risks such as operating costs brought about by frequent fluctuations in international oil prices,but also face internal management risks while conducting business management.Therefore,the use of petroleum derivatives financial instruments for import and export cost control,avoiding price fluctuations and other risks has become the top priority of business management.Petroleum derivatives tools have the characteristics of two-way trading,flexible operation and financial leverage.Enterprises can not only use their hedging to control price risk in the face of unknown price risks,but also use commodity market and spot market price correlation to forecast commodity prices.This feature can also be used in the production and trading companies to design a point-price cooperation model when trading with upstream and downstream,to enhance the certainty of the partners and reduce credit risk.In addition to the above modes of operation,there are many other advantages that can assist and improve the production and operation of the enterprise.However,because the financial derivatives market also has risks,it needs strong professionalism,and enterprises will face many risk factors in practice.If it is not operated properly or encounters systemic risks,the company may also have an adverse impact on the company.How to make greater use of such derivatives tools to achieve real risk control and effective management is also the core content of this paper.Based on the above-mentioned development status of domestic and international petroleum and its derivatives market,this paper focuses on the market risk of price fluctuations caused by Chinese oil trading enterprises.Based on the actual case of L-company serving petroleum trading enterprise customers in the work,the paper analyzes the operational and internal management risks encountered in the application of derivative tools for enterprise risk management in the production and operation process.It points out the internal and external problems existing in China's oil trading enterprises using the derivatives tools to hedge their risks,and analyzes how to make greater use of financial derivatives tools in China's oil trading enterprises.For the company to improve its risk control capabilities and operational capabilities,it proposes strategies and recommendations for enterprises to solve the above problems,and explores more and now combined with innovative trade models to expand corporate profit channels.I hope that this article can help oil trading companies to improve the use mechanism ofpetroleum-related financial derivatives tools,and to be more flexible and tactical.From the internal to the external system,the company constantly adjusts and continuously improves its own risk management capabilities.To enable enterprises to maximize efficiency in derivative applications,and to promote the use and development of derivatives tools in production and operation.