PROGRAM DETAILS

Introduction

This course covers the basic principles of oil trading and the markets. Through a variety of specific exercises, delegates will learn the techniques involved in trading and how to address day-to-day problems.

The course focuses on the key markets, pricing and the mechanisms involved in trading. Aspects of the various exposures encountered in trading are covered together with hedging and price risk management techniques. Exercises & group activities will address each skill required. Over the course, groups will manage their own company positions in live trading situations.

 Learning Objectives

 Participants attending the programme will:

• Comprehend the Brent Market and its influence on international pricing
• Position management with hedging tools
• Supply and demand: fundamentals and implications
• The structure of purchase/sales contracts including exposures and transaction costs
• Crude evaluation and selection
• Physical markets, pricing & price exposure
• Price risk management
• Developing successful trading strategies
• Oil trading and jargon
• Oil Refining
• The use of trading instruments to capture the market
• Use of Freight Forwards to manage freight risk
• Working the arbitrage
• Price Assessment & Market Reporting
• Trading structured positions and live markets

Target Audience

• Personnel who are entering the trading arena
• Oil company staff who interface with the oil trading sector and require a better understanding of trading practice, such as operations, accounting, financial control, treasury, supply or production functions
• Those in the legal and banking fields who want a better understanding of trading practice
• Economist & Analysts

 Training Methodology

The programme will be interactive and practical. There will be work in groups exercises and everyone will get an opportunity to discuss subjects and raise questions.

The trainer will manage a highly interactive combination of lecture/slide presentations, discussion, and short videos sessions. The participants will also be encouraged to raise more of their own questions and to share developing the right solutions using their own analysis, observations and experience.

There will be a pre-test to know the candidates status and shape/tune training programme accordingly to suit them best and a post test after the completion of training.

Program Content

 Day 1:

Crude Oil and Product Markets

• Why trade?
• Supply/demand
• How the markets work

Crude evaluation & selection

• Crude classification and assay
• Gross product worth
• Worldscale (freight costs)
• Net margin and crude selection

Pricing

• Price reporting
• Pricing mechanisms
• Price risk
• Pricing exposure

Day 2:

Demand & Supply

• Fundamentals & Implications
• Current reserves & production
• Oil supply & demand and trade implications

Shipping and Freight

• Freight exposure and freight forwards

 Contracts

• Issues and problems

 Price Risk and Risk Management

• Summary of markets (Physical, Forwards, Futures, Swaps, Options)
• Understanding long and short positions
• Introduction to hedging tools
• Basis risk

Day 3

 Hedging Instruments

• Evolution of the market
• Crude oil forward markets
• Crude forward contracts
• Spread trading
• Review of futures contracts & terminology
• Role of ICE/Nymex
• Hedging example using futures
• Basis risk and forward curve

Product Trading

• Light and Middle Distillate Trading
• Fuel Oil Trading
• Developing successful trading strategies
• World product markets and pricing
• Locations, time and quality arbitrages
• Futures – features of the key futures markets
• Delivery

Crude Trading

• Developing successful trading strategies
• Negotiating term deals
• Other risks and exposures
• Arbitrage price risk management
• Payment mechanisms, letters of credit
• Counterparty selection

Day 4

Oil Refining

• Crude supply, refineries & finished product
• Refiners change product mix
• Supply, demand & alternative fuels
• Emissions & product quality
• Refinery margins & investment

Product Trade Flows & Transport

• Differences between products & crude
• The main product markets
• Product price drivers
• Product price differentials
• Refining balance
• Fundamentals of the various product markets
• Power market
• Bunker market
• Atmospheric residue market
• Importance of refining margins
• Freight
• Arbitrage & trade
• Role of traders/blenders

Introduction to Advanced Instruments

• The EFP
• Swaps & Options
• Spreads and basis trading

Day 5

Trading: options and risk management strategies

• Options: terminology and examples
• Options pricing
• Risk management exercise

 BFO market & CFD’s

• The Brent forward contract
• Brent lifting programme
• Linking of the 21 day BFO & dated Brent markets
• Contracts for difference/ Brent CFD market

 Market reporting and price assessment

• What is Platts?
• Market needs
• Scope of crude and product reporting
• Price assessments and confirmation

Case Studies and Exercises Include:

• Price exposure
• Arbitrage
• Basis risk
• Negotiating a deal
• Freight Hedging
• Option valuation
• Contract Risks
• Managing ongoing positions
• Trading the live market