The hedging contracts used by the major shippers - ocean transport, domestic trucking, cruise lines, etc are mostly 12 months, so the big hit in pricing won’t come until early next year (long after the elections). There are some which are of shorter duration, but the standard hedge is 12 months, I’m told.
That is fine if they are 12 month contracts. That does not mean they are January through December, or whatever. My friend who follows this is saying the wave of contracts ending begins now. It is not just now, but it begins now. Different shippers have different spreads of futures contracts. Bit by bit those contracts are ending now.
The rise in prices began in February, but the contracts prior to February have been used into this period.
Yes, the operative part is “bit by bit”. The hedging contacts soared when the war first broke out. While not all of those are 12 months, that’s the most popular range, so the big “lump” won’t expire until next February.
Meanwhile we are working off the much smaller “typical” hedging that goes on, which means the prices shippers etc are paying are somewhat capped - but will really jump next Spring.
Correct me if I am wrong. There is no Y axis legend that I see.
But the Y is the price or affects the strike. That is not the volume of contracts. The curve is just colored in by price.
The volume of contracts the shippers bought did not fluctuate just the strike price fluctuated. I get that is not an absolute statement.
Logically from February till whatever month during the rise while promises of a quick resolution kept coming, the shippers did not up increase the volume of contracts. The speculators did. The shippers only expect so much business either way. The contracts that are not in the money simply expire worthless.
Shippers more and more will have to pay the market value of diesel. That is the point. They had some cover from contracts but that is evaporating.
**Yes, there was a massive surge in oil futures trading and a historic price spike when the U.S.–Iran warbroke out in late February and early March 2026****.**
When the conflict intensified—marked by the closure of the critical Strait of Hormuz shipping route—global energy markets experienced immediate panic buying. On March 6, 2026, U.S. crude oil futures skyrocketed by more than 12% in a single day, and by March 9, Brent crude futures surged near $120 a barrel.
Here. Notice this is delineated by VOLUME. Also notice something strange happening right at the end of February/beginning of March? Huge jump. Most of those will expire NEXT February. What’s rolling off now is part of the little tiny line at the beginning. What happens in February is part of the BIG FAT JUMP from the beginning of this war.
You are constantly assuming a 12 month rolling basis. That is not how it works.
The last bolded bit means regardless the shippers will be adding surcharges to profit off the situation.
Shipping companies and commercial carriers typically buy diesel or marine fuel futures and derivative contracts 3 to 12 months in advance, scaling into positions gradually rather than executing a single purchase. [1]
Timing and Strategy
Rolling Horizons: Corporations manage fuel exposure on a rolling 12-month budget cycle. Hedging for the peak winter holiday shipping surge (typically October through December) generally begins 6 to 9 months prior (around March to June of the same year).
Layered Hedging: Shippers rarely buy all contracts at once. Instead, they use a laddered approach, purchasing small batches of monthly futures (such as October, November, and December contracts) month-by-month to average out market price volatility.
Market Triggers: Rather than adhering strictly to a calendar date, risk managers often accelerate or delay purchases based on technical price dips, geopolitical shifts, or target consumption thresholds (many major international transport firms aim to cover 60% to 80% of projected seasonal needs well ahead of Q4).
Industry Divergence: While European and international maritime and logistics operators frequently maintain active rolling futures portfolios, many North American freight and trucking operators rely less on multi-month financial derivatives, choosing instead to manage near-term cost swings via floating fuel surcharges passed directly to customers. [3]
If you’d like, let me know:Are you looking at maritime bunker fuel (Low-Sulfur Gasoil/ULSD) or land-based trucking diesel?Are you analyzing a specific quarter or risk-management policy?I can provide more targeted details on contract specifications or hedging windows.
The Fed should raise rates tomorrow. I have my doubts. I think Warsh doesn’t want to incur the wrath of the Prez right before the election, so maybe they wait one more cycle?
Meanwhile the Times is reporting that Japan is rethinking its long romance with Abenomics, and might raise rates by a full point, perhaps even a point and and half because of their embedded inflation.
That is a trap for Trump, not for Warsh. Warsh is a lot smarter than Trump. Look at the two different study patterns. LOL, Trump objecting will get a harsh public response. The public expects this hike right now.
It likely won’t make a difference either way. The “market” has decided that interest rates are going up, look at Fedwatch for example, it has 92+% chance for 25 basis points higher today. Keep in mind that that number is based on real money, very large sums of money traded in the interest rate futures market. So whether or not the Fed decides to raise today or on Dec 9th after the election, most meaningful interest rates (commercial paper, mortgage, Treasury, etc) will probably remain elevated or even rise some more.
