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NPV

Financial metric calculating the present value of future cash flows using a specified discount rate.

Net Present Value (NPV) is the present value of expected future cash flows discounted at an appropriate rate. In oil trading, it applies to swaps, investments, or project valuations.

NPV helps determine the economic viability of hedging contracts or infrastructure projects. Positive NPV indicates profitability, while negative NPV signals a potential loss.

Discount rates incorporate risk, time value of money, and cost of capital. For energy projects, assumptions about production, prices, and operating costs drive NPV.

It is a key financial tool linking market forecasts to investment decisions.

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