Posted by BobAxelrod > Sep 11, 2022 10:38 AM |

Post removed. Why?

Posted by BobAxelrod > Sep 11, 2022 10:40 AM | Report Abuse

I'm not so much with PetronM, more keen with HY....the wilder one.

Posted by CharlesT > Sep 11, 2022 10:40 AM | Report Abuse

Posted by BobAxelrod > 31 seconds ago | Report Abuse

And nobody's reading a word of his repeated posts anymore......

Frankly, I really admire his persistence.....but I doubt if anyone here read his post anymore...after posting hundred times (24 hours a day 7 days a week) here....

Maybe OTB will still give face to read lah I think

Posted by CharlesT > Sep 11, 2022 10:41 AM | Report Abuse

Or thousand times i dunno I never count never read I have to admit that

Posted by BobAxelrod > Sep 11, 2022 10:41 AM | Report Abuse

The world over, even US is looking at a long and protracted war in Ukraine......and with sanctions, Oil is Putin's weapon......the rest, leave to your imaginations.

Posted by BobAxelrod > Sep 11, 2022 10:44 AM | Report Abuse

One has to be above the fine details and small intricacies, need to be above temporal matters for a holistic view on this playing field.

Posted by CharlesT > Sep 11, 2022 10:45 AM | Report Abuse

The last person I see here in i3 who is as persistent as Probability is Calvin.....

Salute both for their spirits, the end result is not important lah

Posted by CharlesT > Sep 11, 2022 10:47 AM | Report Abuse

Posted by probability > 1 minute ago | Report Abuse

by the time you calculate cash balance and see...

may be they buy further retails sections from Shell Malaysia

expand like they are doing it in sri lanka

I saw some glove co starting to diversify using their huge cash reserve...some do condom some do shopping mall some do detergent

Posted by CharlesT > Sep 11, 2022 10:48 AM | Report Abuse

Posted by probability > 15 seconds ago | Report Abuse

dont compare calvin la...u know he simply plug data from air..he is typical pasar malam sales man

I meant the spirit lah....even some may think u both also plugging the figures fm the sky

Posted by probability > Sep 11, 2022 10:49 AM | Report Abuse

thats why they are introducing price cap on russian oil instead of complete sanction

Posted by BobAxelrod > Sep 11, 2022 10:47 AM | Report Abuse

Let's just say, Oil price doesn't need to be sky high...just high enough and unreachable to some.. Oil Distributions, channels and supply chains are not going back to as before....sanctions seen to that. Even EU is not afraid of this step. UK is facing extremely high Energy Bills...new and first act for new PM.

Posted by BobAxelrod > Sep 11, 2022 10:49 AM |

Post removed. Why?

Posted by BobAxelrod > Sep 11, 2022 10:50 AM |

Post removed. Why?

Posted by CharlesT > Sep 11, 2022 10:50 AM | Report Abuse

Leaving for Genting now to collect my jackpot cheque shortly.

Will catch up with u guys later.

Remember, if I can get jackpot HY also can get high diesel price to stay for a long long time

Posted by BobAxelrod > Sep 11, 2022 10:51 AM | Report Abuse

My Gardener has better intelligence than to talk about capping Russian Oil......

Posted by CharlesT > Sep 11, 2022 10:51 AM | Report Abuse

If I can HY also can

Posted by CharlesT > Sep 11, 2022 10:51 AM | Report Abuse

Dont give up on HOPE...pray more

Posted by BobAxelrod > Sep 11, 2022 10:51 AM | Report Abuse

Good luck, Charlie.....wink!

Posted by BobAxelrod > Sep 11, 2022 11:04 AM |

Post removed. Why?

Posted by probability > Sep 11, 2022 11:17 AM | Report Abuse

whatever difference in crack secured by hedged instrument and hedged item goes to P&L directly

only the effective portion of the hedged item an hedged instrument goes to OCI (cash flow hedge reserve) before being transferred to P&L when the hedged item physical transaction takes place

example 1:
.........

hedged instrument gain: 10 USD/brl
hedged item loss: 9 USD/brl

ineffective portion: 1 USD/brl gain (immediately recognized under P&L)

effective portion: 9 USD/brl (kept in OCI cash flow hedge till hedged item delivery/transaction is completed to transfer to P&L)


example 2:
..........


hedged instrument loss: 10 USD/brl
hedged item gain: 8 USD/brl

ineffective portion: 2 USD/brl loss (immediately recognized under P&L)

effective portion: 8 USD/brl (kept in OCI cash flow hedge till hedged item delivery/transaction is completed to transfer to P&L)


Posted by BobAxelrod > Sep 11, 2022 11:04 AM | Report Abuse

So, Hedging left is wrong, and right is also wrong??..

Sslee, your advice please....hedged at $20 and price of physical moved up....loss? And if price dropped below $20....also loss??? Then which direction is a win????
Thank you.

Posted by probability > Sep 11, 2022 11:26 AM | Report Abuse

a good link to understand hedging:

Cash flow hedge accounting - ACCA (SBR) lectures

https://www.youtube.com/watch?v=Drn7hZEPOCc&t=3s

https://www.youtube.com/watch?v=qhuH36aa150

Posted by probability > Sep 11, 2022 1:12 PM | Report Abuse

Column: U.S. diesel stocks critically low after failing to recover over

https://www.reuters.com/markets/commodities/us-diesel-stocks-critically-low-after-failing-recover-over-summer-kemp-2022-09-09/

LONDON, Sept 9 (Reuters) - U.S. inventories of diesel and other distillate fuel oils are now critically low after failing to recover during the summer driving season.

The shortage will keep upward pressure on diesel refining margins and prices unless and until the global economy and distillate consumption slows significantly.

Distillate inventories amounted to just 112 million barrels on Sept. 2, according to high-frequency data published by the U.S. Energy Information Administration (EIA).


Stocks are down from 134 million barrels at the same point in 2021 and at the lowest level for the time of year since 1996 ("Weekly petroleum status report", EIA, Sept. 8).

Stocks have barely recovered from a low of 104 million barrels in early May despite large volumes of crude processing over the summer as refiners met seasonal demand from motorists for gasoline.

The seasonal accumulation of distillate inventories since the end of June has been one of the smallest in the last 30 years, pointing to a persistent underlying shortage (https://tmsnrt.rs/3B26Xbm).

Domestic consumption is muted and running around 200,000 barrels per day (bpd) below the pre-pandemic five-year seasonal average.

But exports remain high as refiners respond to shortages around the world caused by the rapid rebound from the pandemic, disruptions caused by Russia's invasion of Ukraine, and China's coronavirus lockdowns.

Net exports were almost 1.3 million bpd in the five weeks ending on Sept. 2 compared with around 0.8 million bpd at the same point in 2021.

U.S. refiners have a window to boost inventories over the next few weeks by prolonging high crude processing rates for longer after the summer than normal and switching units from max-gasoline to max-distillate mode.

But the shortage of distillate fuel oils is worldwide with stocks at their lowest level for more than a decade in Europe and Asia.

Europe's distillate inventories are down 68 million barrels compared with 2021 at the lowest seasonal level since 2002.

Only a global slowdown in manufacturing and freight transportation will rebuild stocks to more comfortable levels and abate the upward pressure on refinery margins and oil prices.

.......

Keyword - ONLY A 'GLOBAL' SLOWDOWN

Posted by probability > Sep 11, 2022 1:22 PM | Report Abuse

But charlest wont believe this cracked up story :(

.......

Basically they are saying you need all the stocks listed in the world earnings to decline before diesel price comes down...

not sure even then its crack spread can come down from 50 USD/brl presently to 17 USD/brl like in 2017 Hurricane Harvey...

Posted by PSAi3alert > Sep 11, 2022 1:32 PM | Report Abuse

SSLee,

Had another look at HRC's Q2 2022 financial results

Implied cost per barrel was USD131 for Q2 2022 compared to USD67.8 for Q2 2021

Implied spread is USD20 per barrel for Q2 2022 compared to USD7.2 for Q2 2021

Manufacturing expenses declined by 22% although volumes increased by 25%


--->>> Brent did not average at USD131 for Q2 2022

--->>> Physical spread of USD20 per barrel can be wiped out by derivative losses

--->>> Manufacturing expenses do not look right


--- Numbers from Q2 2022 financial results ---

HRC RM Millions _____________ Q2 2022 ______ Q2 2021
Revenue ______________________ 6,894 _________ 2,501
Purchases ____________________ (5,981) ________ (2,262)
Gross profit __________________ 912.9 __________ 239.4
Manufacturing expenses _____ (43.3) _________ (55.5)

Ave product prices ___________ USD151/barrel ___ USD75/barrel
Sales Volume increase ______ 35%


--- Implied Variables ----------

_______________________________ Q2 2022 _____ Q2 2021
Average USD/RM ____________ 4.3 ___________ 4.15
Barrels sold __________________ 10.6M ________ 8.035M

Cost per barrel_______________ USD131 ______ USD67.8
Manufacturing exp / barrel __ USD0.95 _____ USD1.66


{ Barrels sold = Revenue / ( Ave product prices/barrel x USD/RM) }
{ Cost per barrel = Purchases / ( Barrels x USD/RM ) }

---

Posted by Sslee > 3 hours ago | Report Abuse

The product prices during 2Q 2022 and YTD 2022 improved from an average price of USD75 per barrel and USD71 per barrel for the corresponding periods in 2021 to USD151 per barrel and USD133 per barrel respectively.

So HRC is not so charitable selling their products YTD 2022 at USD 133 per barrel and Q2 at USD 151 per barrel

Posted by probability > Sep 11, 2022 1:36 PM | Report Abuse

what i have noticed is HY, despite taking premium malaysian crude, its margins are pegged against MOPS

thats why you will see their COGS and Revenue about 10% higher than for brent and weighted avg products pricing

further logistics cost are high to be added on COGS

Posted by stockraider > Sep 11, 2022 2:00 PM | Report Abuse

Still bullshittng on hedge accounting loh!

If Raider just substitute the words "hedge" with "speculative or gambling, these word feed perfectly on Hengyuan current situation or current reporting situation too mah!

The facts...is Hengyuan Derivative have an outstanding unrealized losses of Rm 1.3b in its books, not being flow to its P&L account loh!

Whether this massive Rm 1.3b losses are actually due to hedging, speculation, gambling or due siphoning nobody actually knows.,...it is for anybody guess mah!

Thus to trust these Rm 1.3b deficit could be reverse from hengyuan account....is like hoping that you would strike lottery loh!

As the current situation for Hengyuan is much dire, bcos the crack spread now is low ranging from USD 0.5 to 5.0 loh from earlier USD 20 enjoyed in 2nd qtr mah!

This type of low crack spread will result...in very low or negative operating profit for hengyuan loh!

And Whether the current Hedging situation could save HRC financial negative position is a doubtful question, bcos HRC hedging need to reverse the Massive Rm 1.3b derivative losses deficits 1st, b4 it can contribute any bottom line to its P&L for Q3 result mah!

Posted by probability > 1 day ago | Report Abuse

Truth cannot be suppressed very long, the earlier one investigates and verify what is the truth the more upper hand one will have

the longer one waits the higher the odds are for others to find out ahead of you..

....

HEDGE ACCOUNTING & how it is reported on OTHER COMPREHENSIVE INCOME (OCI)

https://www.youtube.com/watch?v=w5P_M9fWqGg

The above simple example for ORANGES can be viewed as CRUDE OIL for HY where the hedging is done with the intention of going LONG (the higher the future price, the higher the gain)

For refined products hedge, it is for going SHORT, the higher the future price, the greater the loss.

The net effect of the above two is what reported by HY under their OCI.

The Cash Flow Hedge (CFH) in OCI shows the hedging gain / loss for the hedged position which are closed, but the corresponding physical market transaction (change in ownership of the goods) is yet to take place to deliver the available market gross profit which is then offset by this hedging gain / loss on CFH to give the P&L exactly as it has been hedged initially.

The Cost of Hedging Reserve (COHR) on the other hand shows the hedging gain / loss for all the balance hedged position (yet to be closed) from the notional amount (refining margin swap contract RMSC), where the corresponding physical market transaction will take place within the maturity period (next 24 months) assuming the hedging positions are closed as per current spot rate.

As such, COHR is a highly hypothetical figure that changes significantly as per the market spot price of the commodity (mark-to-market) when the financial reporting period is closed.

............

Now that the refined oil products price (gasoline) had significantly retreated from the peak of 30th June, if it remains the same till end of Sept, Q3 will report huge gain on OCI

If prices of refined products relative to crude (the crack spread) are back to Q1 22, 30th Mar level, cost of hedging reserve shall be exactly back to the figure reported in Q1 22 results for Q3 22.

Posted by stockraider > Sep 11, 2022 2:18 PM | Report Abuse

Understanding why Prominent Previous Refinery Owner in Msia like Shell & Esso do not do hedging ?

1.The traditional business model of hardcore refinery are simple loh!
They buy physical crude & refine it to physical petrol & diesel and sell at price base on formula with reference to Crude Price, Exchange Rate & Crack Spread fixed by Msia Govt and make money mah!

They do not do fwd hedging n their natural hedge is the inventory they have in hand & their refinery to quickly efficiently process the crude to mainly Petrol & Diesel & quickly sell base on the fixed formula the msia Govt had set loh!

Now with the introduction of Hengyuan, it has modified the refinery model as follows loh!

1. Traditional Refinery Business Model as highlighted above.
2. Virtual Refinery Business Model using Paper Derivative as an investment & hedge to generate profit to be discussed below loh:

2.Virtual Refinery Business model thru pure hedging & derivative loh!
Do u notice that Hengyuan lose alot of monies consistently most of the time despite, mathematical computation on paper the derivative & hedge is highly profitable as per feedback of SSLEE and Probability leh ?

This is bcos the paper computation derivative & hedge shows profit do not reflect the reality situation & business dynamics of the trade loh! Reasons are as follows loh:

The Virtual Refinery Purchase its future crude by purchasing from NYMEX & compute it sells on Nymex sell price of Petrol & Diesel which showed a good profit when doing its hedge but how come this trade fail & registered big losses at the end leh ?

1. The mkt is very dynamic loh! On paper u may see big virtual profit by hedging future crude purchase & future sell of petrol & diesel end products....but when time come for settlement in turnout to be a loss loh!
Why leh the complete hedge trade of buying & selling here cannot convert to a easy profit, like paper indicated leh ?
a. This is bcos the movement of future crude purchase price, do not completely correlate to the selling future price of petrol & diesel price due to huge mkt volatility mah! Just within a day the business dynamic may change loh! Like within 1 day the Crude Price go up 10% whereas the Petrol & Diesel selling future price did not move at all or vice versa loh!
b. The trade initiated are pure paper swap with no delivery of physical goods, thats why it may not reflect the real dynamic of a real physical refinery mah!
c. Even it involve actual delivery of the commodities, there are extra cost & logistic to bring this commodities for processing to convert it to a profit mah!
d. Thus the virtual refinery of Hengyuan business model has shown consistent losses bcos of this challenges discussed above loh!

REMEMBER WHAT RAIDER SAY ABOVE LOH!

A REFINERY BUSINESS LIKE HENGYUAN DO NOT REALLY NEED A HEDGING BUSINESS MODEL AS WELL.

IN HENGYUAN CASE.....THEY EVEN OVER DO IT....EXPOSING IT WITH A HUGE MASSIVE HEDGING LOSSES TODATE OF RM 1.3B LOH!

WHO IN THE RIGHT MIND, CAN CAUSE THE CO TO LOSE A MASSIVE RM 1.3B TODATE THRU HEDGING TODATE LEH ?

SINCE SSLEE GO BACK TO CHECK.....RAIDER HAD UNCOVERED ANOTHER MASSIVE HIGH RISK POSITION OF HENGYUAN....WHICH IS HIGHER EVEN BEYOND, GENERAL RAIDER CURRENT EXPECTATION LOH!-..........To be continue......!!!



Posted by Sslee > 21 hours ago | Report Abuse

Your question 2 is a mystery to me....how can u claim your refining margin is usd 25 to 30, when your current crack spread is only from usd 2 to 5 leh⁷ ? How did u derive this high margin USD 25 margin....is it a guesstimate or from management disclosure leh ?

Stockraider,
Q2 result is for financial end 30/06/2022.
So go and check on 30/06/2022 what is the refining margin spot month and future month.

So my layman question.
If you hedge the refining margin at USD 12 - 20 per barrel from month july onward till maybe beyond 2022 up to 2023.

And current crack spread is only from usd 2 to 5 leh then how much money your refining magin swap contracts maturity on Sept will earned?

Posted by probability > Sep 11, 2022 2:26 PM | Report Abuse

@not so pandai raider...

Understanding the Cost of Hedging

https://www.treasuryandrisk.com/2021/10/13/understanding-the-cost-of-hedging/?slreturn=20220811021228

Why Hedge Performance Is Not the Right Measure of Cost
.......................

Individuals less familiar with hedging may think that the cost of a hedge is equal to the monetary gain or loss upon settlement of the derivative. This is not an accurate assessment, as it ignores the fact that hedging is ultimately meant to reduce risk and uncertainty.

Consider a company that is planning a bond transaction. In one month, the organization will issue a $1 billion, 10-year bond at 3.5 percent. The treasurer is worried that interest rates may rise over the next month, making the bond more expensive than expected, so she decides to partially hedge that risk using $500 million worth of 10-year treasury locks. If rates rise, the derivative will be an asset that offsets the increased interest rate at issuance, reducing the financial impact that market shift has on the company’s new debt.

By contrast, if rates fall, the derivative will become a liability; the bond will be priced better than expected, and the derivative will look like an unnecessary cost. Suppose rates fall by 50 basis points (bps) from the time the hedge is executed until the time the bond is issued. The bond issuance will be executed at 3.0 percent, and the derivative will be a liability of roughly $2.5 million. However, that is only half the story. Amortizing the termination value of the hedge over the life of the financing results in an effective cost of debt of roughly 3.25 percent, which is still better than the original expectation of 3.5 percent.

Some executives facing such a scenario will view the hedge as costly because it ultimately was not needed. This is not the right perspective. The purpose of the hedge was to reduce risk in future outcomes, giving the company greater certainty around cost of capital planning. Think about the opposite scenario: If rates had risen 50 bps instead of falling, the hedge would have been an asset worth roughly $2.5 million, and the effective cost of debt would have been roughly 3.75 percent—higher than the original expectation because only half of the issuance was hedged. In this case, would the treasurer be happy that the hedge was an asset, even if the cost of financing was higher than anticipated?
In both scenarios, the hedge serves its purpose by reducing the potential volatility of future issuance outcomes and narrowing the band of possible issuance rates. By keeping in mind that derivatives are meant to reduce risk, companies can move away from measuring the costs of their hedging programs using gains and losses.

Posted by probability > Sep 11, 2022 2:42 PM | Report Abuse

Cost of hedging only shows the potential loss / gain on the 'hedged instruments' in the future in OCI, but it does not show the reverse gain / loss on 'hedged items' that negates this as it takes place in parallel in the future....


hedged instruments and hedged items always goes on opposite direction to offset each other - that is the basic fundamentals of hedging.

Posted by stockraider > Sep 11, 2022 2:59 PM | Report Abuse

Lets play dumb & assume naively SSLEE & PROBABILITY use their computation is going to work & Raider can be billionaire if can use their hedging model disciplinary and steadily below loh!

If the virtual refinery of buying crude future & hedging it buy selling future petrol & diesel with a good paper profit computed by SSLEE & Probability really work, then General Raider will make billions just with Rm 10 million....by just doing repeating regular hedge base on the formula advocated by Probability & SSLEE mah!

If that is highly successful....Raider will become a billionaire, bcos it is risk free....bcos everything is hedge......with good reasonable paper profit, when the hedge is done mah!

The Virtual Refinery own by raider will Purchase its future crude by purchasing from NYMEX & compute it...& sells on Nymex sell price of Petrol & Diesel which showed a good profit on paper when doing its hedge...the same hedge can be done...vice versa when crude is selling at a premium to Diesel & Petrol loh!

With this model Raider effectively do not really need a refinery mah!
Just by using the hedging....Raider can do the trick of making money without any need of any refinery mah!

BUT LETS FACE IT LOH....IT IS NOT SO SIMPLE IN REAL LIFE LOH!

The truth it is not true mah!
The deal done ....is actual speculative & unsustainable... despite fully hedge loh!

The situation & dynamics.. does not applies only to CRUDE & Petroleum mkt...but will apply to every commodity like Palmoil, Soyabean Oil, Metal etc loh!

U can do it on paper & completely hedge on paper with a reasonable profit....but the end, it still did not make money loh!

Thats is the reasons why....NOBLE & Hin Leong....2 large listed company in singapore dealing with trading of commodities go bankrupt despite having all the capital, software & resources to support its trade loh!

I think sifu like SSLEE & Probability are just naive....by claiming a fully hedge position will make monies loh!

That is the reasons why ESSO & Shell refuse to do hedging loh!

Also that is the reasons why hengyuan registered a huge unrealised hedging losses on its derivative loh!

Beside this risk of raider fear of siphoning money loh!

HEDGING....RAIDER NEED TO UPDATE U LOH!

THE HEDGING TRADE THAT HENGYUAN HAS DONE IS NOT REALLY DONE PROFESSIONALLY & SAFELY LIKE WHAT RAIDER HAD DONE FOLLOWING THRU REPUTABLE MKT LIKE NYMEX or CME LOH!

THE HENGYUAN REFINING MARGIN SWAP IS FLOW THRU ONE COUNTER PARTY AGENT IN SINGAPORE LOH!
ACTUALLY THERE IS NO REFINING MARGIN SWAP AVAILABLE IN THE REPUTABLE MKT LIKE IN NYMEX OR CME MAH!

IT IS JUST AN ARRANGEMENT BETWEEN HENGYUAN WITH A PRIVATE PARTY LOH!
THUS THIS TYPE OF DEALS WILL HAVE MUCH LESS ASSURANCE & IT CAN BE AN EASY DEVICE FOR SIPHONING CASH- THIS TYPE OF DEAL CAN BE EASILY STRUCTURED MAH!

THUS WE SHOULD BE VERY CAREFUL WITH THIS TYPE UNCONVENTIONAL PRIVATE REFINING MARGIN SWAP LOH!

ACCORDING RAIDER SIFU SENIOR ANALYST & CONFIRMED BY 009 INVESTIGATION TEAM, THEY HAVE INFO TO SUSPECT , THAT THE COUNTER PARTY IS A PRIVATE CHINESE PARTY OPERATING IN SPORE WHO HAVE A VERY CLOSE RELATIONSHIP WITH THE HENGYUAN CHINA OWNER LOH!

JUST BE VERY CAREFUL WITH REFINING MARGIN SWAP LOH!

Posted by probability > Sep 11, 2022 3:11 PM | Report Abuse

aiyo @raider...why u so not so pandai?

..think you drinking too much Baijiu leh..

how to make money using hedging instruments alone?

you really need to meditate...take a deep breath liao...

understand how refining margin hedging works first

go through the below and check yourself can you make money just buy playing with the hedging instrument consistently - both on the refined product gasoline and crude without a physical refinery?

..............

Extract from below article:

www.cmegroup.com/education/articles-and-reports/introduction-to-crack-spreads.html

Fixing Refiner Margins Through a Simple 1:1 Crack Spread

In January, a refiner reviews his crude oil acquisition strategy and his potential gasoline margins for the spring. He sees that gasoline prices are strong, and plans a two-month crude-to-gasoline spread strategy that will allow him to lock in his margins. Similarly, a professional trader can analyze the technical charts and decide to “sell” the crack spread as a directional play, if the trader takes a view that current crack spread levels are relatively high, and will probably decline in the future.

In January, the spread between April crude oil futures ($50.00 per barrel) and May RBOB gasoline futures ($1.60 per gallon or $67.20 per barrel) presents what the refiner believes to be a favorable 1:1 crack spread of $17.20 per barrel. Typically, refiners purchase crude oil for processing in a particular month, and sell the refined products one month later.

The refiner decides to “sell” the crack spread by selling RBOB gasoline futures, and buying crude oil futures, thereby locking in the $17.20 per barrel crack spread value. He executes this by selling May RBOB gasoline futures at $1.60 per gallon (or $67.20 per barrel), and buying April crude oil futures at $50.00 per barrel.

Two months later, in March, the refiner purchases the crude oil at $60.00 per barrel in the cash market for refining into products. At the same time, he also sells gasoline from his existing stock in the cash market for $1.75 per gallon, or $73.50 per barrel. His crack spread value in the cash market has declined since January, and is now $13.50 per barrel ($73.50 per barrel gasoline less $60.00 per barrel for crude oil).

Since the futures market reflects the cash market, April crude oil futures are also selling at $60.00 per barrel in March — $10 more than when he purchased them. May RBOB gasoline futures are also trading higher at $1.75 per gallon ($73.50 per barrel). To complete the crack spread transaction, the refiner buys back the crack spread by first repurchasing the gasoline futures he sold in January, and he also sells back the crude oil futures. The refiner locks in a $3.70 per barrel profit on this crack spread futures trade.

The refiner has successfully locked in a crack spread of $17.20 (the futures gain of $3.70 is added to the cash market cracking margin of $13.50). Had the refiner been un-hedged, his cracking margin would have been limited to the $13.50 gain he had in the cash market. Instead, combined with the futures gain, his final net cracking margin with the hedge is $17.20 — the favorable margin he originally sought in January.

Posted by stockraider > Sep 11, 2022 3:14 PM | Report Abuse

Just becareful loh!

The Hedging is done thru a Private Refining Margin Swap....thru a chinese counter party in SPORE loh!

It is one to one bets loh!

Be very careful mah!

Posted by probability > Sep 11, 2022 3:16 PM | Report Abuse

BECAREFUL OF THE NOT SO PANDAI RAIDER LOH! BRAIN DAMAGED SPAMMER without any substance lorrr!!!!

Posted by stockraider > Sep 11, 2022 3:25 PM | Report Abuse

Why need to be very careful with "Private Refining Margin Swap" ?

Even in the event, we are highly successful with the trade and make billions- The Private Counter Party....can simply just default and nothing we can do loh!

The huge sum of money, that Hengyuan is betting...to tune of Rm 1.3 billion losses, is just ridiculous mah!

Posted by stockraider > 2 minutes ago | Report Abuse

Just becareful loh!

The Hedging is done thru a Private Refining Margin Swap....thru a chinese counter party in SPORE loh!

It is one to one bets loh!

Be very careful mah!

Posted by probability > Sep 11, 2022 3:29 PM | Report Abuse

ALREADY EXPLAINED how the derivative loss figure in OCI comes about mah!!

NEED A FUNCTIONING BRAIN TO UNDERSTAND Lorrr!!!

..................

Hengyuan had hedged 18 million barrels at avg 12.7 USD/brl refining margin to be effected as it matures at the rate of 0.8 million barrels per month. This is mainly for gasoline.

This is indicated by the Refining margin Swap contract (RMSC) of USS 226 million as can be seen on their financial report.

USD 226 million = USD 18 million x USD 12.7/brl

The fair value changes with respect to the hedged value are reflected under Other Comprehensive Income (OCI) using Cash flow Hedge and Cost of hedging reserve as per IFRS 9:

These are basically forecasted derivative loss against mark-to-market margin in future as of 30th June.
....................

Since the market margin (in futures) as of 30 June 22 was extraordinarily high at $ 32/brl. The expected hedging losses for gasoline going forward was high and reported accordingly.

Hedging loss:

(hedged margin - spot margin) x hedged barrels

= (12.7 USD/brl - avg 32 USD/brl) x 18 million barrels
= - USD 347 million
= - 1.5 Billion MYR

This is not a real loss, but expected 'ópportunity loss' due to hedging and thats why it is not reported in P&L.

The above forecasted losses when occurs in future, it is accompanied by greater gross margin where after offsetting these losses, it will deliver the profit margin in P&L as per the original hedge value of 12.7 USD/brl

As such, these forecasted loss done at end of each financial report would over-turn completely when gasoline margin dives down..

Refer below link which is presently showing $ 5.2/brl in Sep 2022 to $ 4.3 /brl in Dec 2023.

At end of June it was showing avg $ 32/brl

link:
.....

www.cmegroup.com/markets/energy/refined-products/singapore-mogas-92-un...

At end of Sept 22' (for Q3), if the spot margin value above maintains, you have

Hedging gain:

= (12.7 USD/brl - avg 4.5 USD/brl) x 18 million barrels
= USD 147 million
= 650 million MYR

Posted by stockraider > Sep 11, 2022 3:31 PM | Report Abuse

Ya how do u handle the high risk highlighted below leh ?

Why need to be very careful with "Private Refining Margin Swap" ?

Even in the event, we are highly successful with the trade and make billions- The Private Counter Party....can simply just default and nothing we can do loh!

The huge sum of money, that Hengyuan is betting...to tune of Rm 1.3 billion losses, is just ridiculous mah!

Posted by stockraider > 2 minutes ago | Report Abuse

Just becareful loh!

The Hedging is done thru a Private Refining Margin Swap....thru a chinese counter party in SPORE loh!

It is one to one bets loh!

Be very careful mah!

Posted by probability > 2 seconds ago | Report Abuse

ALREADY EXPLAINED how the derivative loss figure in OCI comes about mah!!

NEED A FUNCTIONING BRAIN TO UNDERSTAND Lorrr!!!

..................

Hengyuan had hedged 18 million barrels at avg 12.7 USD/brl refining margin to be effected as it matures at the rate of 0.8 million barrels per month. This is mainly for gasoline.

This is indicated by the Refining margin Swap contract (RMSC) of USS 226 million as can be seen on their financial report.

USD 226 million = USD 18 million x USD 12.7/brl

The fair value changes with respect to the hedged value are reflected under Other Comprehensive Income (OCI) using Cash flow Hedge and Cost of hedging reserve as per IFRS 9:

These are basically forecasted derivative loss against mark-to-market margin in future as of 30th June.
....................

Since the market margin (in futures) as of 30 June 22 was extraordinarily high at $ 32/brl. The expected hedging losses for gasoline going forward was high and reported accordingly.

Hedging loss:

(hedged margin - spot margin) x hedged barrels

= (12.7 USD/brl - avg 32 USD/brl) x 18 million barrels
= - USD 347 million
= - 1.5 Billion MYR

This is not a real loss, but expected 'ópportunity loss' due to hedging and thats why it is not reported in P&L.

The above forecasted losses when occurs in future, it is accompanied by greater gross margin where after offsetting these losses, it will deliver the profit margin in P&L as per the original hedge value of 12.7 USD/brl

As such, these forecasted loss done at end of each financial report would over-turn completely when gasoline margin dives down..

Refer below link which is presently showing $ 5.2/brl in Sep 2022 to $ 4.3 /brl in Dec 2023.

At end of June it was showing avg $ 32/brl

link:

Posted by probability > Sep 11, 2022 3:34 PM | Report Abuse

what risk leh?..that was FORECASTED loss end of June 22 mah!!

now the risk already disappear lorr...

now FORECASTED GAIN liao...

Posted by stockraider > Sep 11, 2022 3:39 PM | Report Abuse

REMEMBER THE COUNTER PARTY CAN JUST WALK OUT, IF LOSE THE HEDGING BACK AGAINST HENGYUAN MAH!

PAKAI OTAK LAH! NO RISK MEH ?

NO RISK MEH ?

Why need to be very careful with "Private Refining Margin Swap" ?

Even in the event, we are highly successful with the trade and make billions- The Private Counter Party....can simply just default and nothing we can do loh!

The huge sum of money, that Hengyuan is betting...to tune of Rm 1.3 billion losses, is just ridiculous mah!

Posted by probability > 59 seconds ago | Report Abuse

what risk leh?..that was FORECASTED loss end of June 22 mah!!

now the risk already disappear lorr...

now FORECASTED GAIN liao...

Posted by probability > Sep 11, 2022 3:40 PM | Report Abuse

PAKAI OTAK LAH,,,now crack spread is below hedging value,,,your otak can faham how it affects cost of hedging reserve or not?

ADA FAHAM KAH??

Posted by stockraider > Sep 11, 2022 3:43 PM | Report Abuse

PAKAI OTAK LAH!
THE COUNTER PARTY....DO NOT WANT TO HONOR....THE PRIVATE REFINING SWAP CONTRACT...IF IT LOSE ALOT OF MONIES TO HENGYUAN MAH!

THIS IS THE RISK MAH!

LU TAU BOH ?

Posted by Balian de Ibelin > Sep 11, 2022 3:47 PM | Report Abuse

just like Barings case so when Barings Bank cannot honour then the other party got zero ...

thats life

you lose you must pay, you win you get zero

Posted by stockraider > Sep 11, 2022 3:47 PM | Report Abuse

U ALA DENGAR BAIK BAIK KA ?
HENGYUAN MENANG MANYAK MANYAK...ON HEDGING....TAPI OLANG TAK BAYAR ...HOW ?

Posted by probability > Sep 11, 2022 3:48 PM | Report Abuse

ITU FORECASTED TANGGAL 30 JUNE MAH..sekarang FORECAST SUDAH LAIN..

LU TAU BO macam mana bikin forecast cost of hedging reserve??

Posted by Sslee > Sep 11, 2022 3:48 PM | Report Abuse

PSAi3alert:
2021 (RM'000):2020(RM'000)
Net fair value losses/(gains) on derivative financial instruments:
- included in purchases (Note 23) 45,445: (823,935)
- included in other operating losses/(gains) 490,546: (300,381)

You can used the revenue to derive at the HRC physical products selling price per barrel.

But you cannot used the purchases to derive at the HRC physical crude buying price per barrel because some of the realised derivatives losses/gains were charged into purchases.

As of quarterly manufacturing expenses some quarter may be higher due to maintenance or newly changed catalyst charged to the quarter.

Posted by BobAxelrod > Sep 11, 2022 3:49 PM |

Post removed. Why?

Posted by stockraider > Sep 11, 2022 3:50 PM | Report Abuse

Ini Info baru mah!

Lu tau boh ?

ACCORDING RAIDER SIFU SENIOR ANALYST & CONFIRMED BY 009 INVESTIGATION TEAM, THEY HAVE INFO TO SUSPECT , THAT THE COUNTER PARTY IS A PRIVATE CHINESE PARTY OPERATING IN SPORE WHO HAVE A VERY CLOSE RELATIONSHIP WITH THE HENGYUAN CHINA OWNER LOH!

Posted by BobAxelrod > Sep 11, 2022 3:51 PM |

Post removed. Why?

Posted by probability > Sep 11, 2022 3:52 PM | Report Abuse

JANGAN BAWA SPEKULASI TANPA BUKTI KUKUH lorr!

OTAK TAK PANDAI macam ini la bikin cerita...

Posted by BobAxelrod > Sep 11, 2022 3:54 PM |

Post removed. Why?

Posted by stockraider > Sep 11, 2022 3:58 PM | Report Abuse

moral of the story....suspect veli penting mah!
Cautious very important mah!

Dulu Serba....olang pun suspect only meh ?
Apa macam sekarang ??

Posted by probability > Sep 11, 2022 3:58 PM | Report Abuse

MORAL OF THE STORY - the CLUELESS will suspect everything...even himself