Singapore Jet Kerosene
What is Kerosene?
Kerosene is a thin clear liquid which is made up of hydrocarbons. These are created from the distillation of petroleum. There are two types of Kerosene, 1-K and 2-K Grade. The 1-K Grade Kerosene will burn much cleaner due to the lower sulphur content.
Uses of Kerosene
Kerosene is commonly used to power jet engines on aircraft, along with some rocket engines. It is more commonly known for it’s use as a lighting fuel in lamps and is used in domestic settings. Kerosene is predominately extracted from crude oil, although it can be extracted from coal, oil shale and wood.
Risks of Kerosene
Like any futures contract, there is always the possibility that the underlying asset i.e. Kerosene will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of Kerosene to rise), if this were to happen and the Kerosene fell in price, your long position in Kerosene will decrease in value.
With any commodity, supply and demand will effect the price dramatically if there is a change. This risk is one that should be monitored on a regular basis and adjusted to suit your risk parameters.
Extraction of Kerosene has an inherent risk with the level of costs associated with extracting the product from the petroleum. This can include, but not limited to: production costs, cost of labour or new tax regulations being implemented.