| Commodity | Tenor | Recommended Structure | Notes |
|---|---|---|---|
| California Carbon Allowances | 2025 | Buy Forwards | Consumer: California carbon allowance prices saw an increase of 10% in 2024 after recording an average daily price of $33.23 in 2023. An annual inflation rate of 2.6% reported in December 2024 moved 2025's auction floor price up to $25.87, with allowance prices going as low as $28.28 in Q1 '24 after starting the year at $34.62. AEGIS recommends buying below $31.00 as the prices are expected to increase in the 2nd half of the year. Spot or forward purchases allow clients to lock in pricing and volume to mitigate the risk of continued rising prices. |
| CME Hot-Rolled Coil (steel) | 1H 2025 | Swaps | Consumer: The front months of the CME HRC Steel curve continue to offer opportunities for consumers to hedge at historically low prices. While the forward curve for both periods is in contango, meaning forward prices are higher than spot prices, consumers can lock in near or below budgeted prices, ensuring input cost targets are met. Options are available for CME HRC, but they are relatively illiquid. Please get in touch with AEGIS for specific strategies that fit your operations. |
| NYMEX WTI | Bal 2025 | Swaps or Tight Collars | Producer: WTI has moved lower since trading as high as $80/Bbl in January. Clients already well hedged should look to swap remaining volume. Producers with substantial volume to add may look to collars if they can tolerate a floor in the low $60s to retain some upside participation. Fundamentals support higher prices through the end of the year. |
| NYMEX WTI | Cal 2026 | Collars or Swaps | Producer: A downward sloping forward curve is hurting producers hedging into years two and three. We recommend clients that are more price-sensitive to utilize swaps to lock in favorable economics. Producers that can tolerate a lower floor can fight backwardation with a collar. |
| NYMEX Henry Hub | Jun25-Oct25 (Summer) | Swaps | Producer: Near-term prices have risen sharply following colder-than-normal weather in January and February, which reduced the storage surplus to a deficit to the five-year average. This has pushed the Summer '25 strip to a multi-year high. Any unhedged volumes can be swapped in at a relatively high price. |
| NYMEX Henry Hub | Nov25-Mar26 | Collars | Producer: The rally in gas prices in early 2025 has lifted the WInter '25/'26 strip to more than $5/MMbtu, while call skew has surged to the highest level since 2022. Given the substantial increase in option volatility, costless collars may be even more attractive. |
| NYMEX ULSD | Bal 25 | Swaps | Consumer: Prompt diesel prices have traded lower alongside crude, following a short-lived rally around the start of the year, driven by anticipation of new US sanctions on Russia. Fears of a weakening global economy due to US tariffs have weighed on product prices in recent weeks.
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