Risk glossary

 

Oil tanker freight derivatives

Oil tanker freight derivatives are over-the-counter (OTC) trades bought and sold in terms of worldscale prices and settled against 11 key tanker routes listed on the London-based Baltic Exchange. The worldscale system (worldwide tanker nominal freight scale) is a system of pricing tanker freight as a percentage of expected freight rates as published by the non-profit WorldScale Association in a table listing the price in dollars per tonne of oil for standard routes, and there is a flat rate for each route. Rates listed – flat rates – are termed WS100, which is the amount needed for a standard vessel to make a profit. Similarly, WS175 means 175% of the published rate. Rates are revised annually.

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