Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

The current petroleum stockpiling by Korean government is based on the static concept of dead-stock. However, the recent changes in economic environment is requiring a transition to the dynamic concept of flow-stock. This study suggested selective trading strategies incorporating derivatives trading as an option for the efficient utilization of domestic strategic petroleum reserve (SPR), and quantitatively analyzed their effects. For this purpose, this study adopted a simulation approach using the weekly spot and forwards prices of WTI for the period of October 1997 to August 2002. Using this sample, this study verified the effectiveness of selective trading strategies. The empirical results are as follows: the selective trading strategies would increase the expected values of profits and decrease their volatilities compared to those of traditional routine strategies; the selective trading strategies using the minimum hedge ratio would improve the results compared to those of the 1:1 naive strategies; and the adoption of trigger value could increase the improvements by the selective trading strategies. Based on the results, it is suggested that, for the efficient operation of domestic petroleum stockpiling, it is necessary to actively utilize the reserve facilities and the reserved petroleum with proper derivatives position.