Professional Training

Mastering Oil Trading Concepts

Mennta Energy Solutions , In London (+2 locations)
3 days
3 days
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Course description

This three-day workshop is designed to follow the popular Oil Trading Orientation (OTO) course.  Mastering Oil Trading Concepts (OTO2) builds on the basics learned to extend your understanding of the complex world of oil trading and take your skills to a higher level.  

Topics explored during the course include crude oil valuation and selection, products valuation, blending and trading, pricing mechanisms and methodologies, practicalities of hedging and futures trading advanced trading and financial engineering, forward curves and market structure, trading controls, ethics and compliance.

A key element of the course is that you get the chance to put the knowledge learned into practice through a series of fast-paced, educational and enjoyable team trading simulations.  These exercises are designed to reinforce and extend your learning from the class.

Please note: a laptop and Excel version 2007 or later is required in order to engage in market data.

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Class delegates include anyone who needs to know more about trading, including those at the very beginning of an oil trading career as well as non-traders wishing to know more about the world of oil trading, including support staff, analysts, accountants and management in the areas of trading, supply, risk management, credit, finance, contracts, IT, operations, transportation and storage.


Crude Oil Valuation & Selection

  • How refineries evaluate different crudes – comparing crudes using LP models and netback calculations, marginal values, transportation and other logistical considerations
  • Crude oil quality differences between different regions; crude oil blending
  • Crude oil yields for different refinery configurations
  • Assessing crude differentials – what affects grade differentials and how to assess them; monitoring and analysing differentials and basis

Products Valuation, Blending & Trading

  • Refinery process choices – impact of feedstock selection, unit configuration and operating conditions in key refinery units
  • Product blending practical issues
  • Blending economics and product valuation in gasoline, middle distillates and fuel oils
  • Ethanol, biofuels and renewable certificates trading
  • Arbitrage trading and evaluation of arbitrage opportunities

Pricing Mechanisms and Methodologies

  • Pricing mechanisms for spot and term contracts
  • OSPs & tenders – different pricing formulas used in different regions
  • Calculations of discounts, premiums and quality escalators
  • Review of key information sources in different markets
  • Price reporting methodologies, including Platts window process
  • Assessments of illiquid markets, including calculations of dated Brent

Crude Forward Markets

  • How forwards are used
  • Brent (BFOE) market, including bookouts, nominations, contract terms and timeline
  • Partials markets
  • Dubai market and North American crude oil markets

Hedging Principles

  • Aim and purpose of short-term (operational / tactical) hedges
  • Price exposure, pricing mechanisms, priced and unpriced trades
  • Timing of hedging decisions
  • Management of basis risk: basis swaps, EFP
  • Aim and purpose of strategic hedges
  • Hedging horizon, timing and approach

Futures Trading Practicalities

  • Exchanges and their trading platforms
  • Contract specifications and termination rules
  • Margining systems and rules, including SPAN, scanning and intermonth ranges etc.
  • Cash flows involved in opening, holding and closing futures positions
  • How physical delivery and cash settlement work for oil futures contracts
  • Market open, close, settlement, trade at settle, minute markers
  • EFP and EFS deal process:  what is agreed, how they are invoiced, why and when they are used

OTC Derivatives Markets

  • Types of instruments: swaps, basis swaps, options
  • Common indices and settlement rules
  • Trading platforms, clearing and settlement in OTC trading
  • Use of CFD/DFL/BFOE/ICE to manage Brent price risk
  • Use of swaps/EFS/EFP to manage Dubai price risk

Hedging the Refinery

  • Objectives of refinery hedging
  • Choice of hedging instruments
  • A basic refinery hedging plan and its implications
  • Operational, opportunistic and tactical hedging choices

Freight & Logistics

  • Freight costs and shipping economics
  • Factors to consider when chartering a vessel
  • Bottlenecks and key areas of delay, including demurrage considerations
  • Freight rates - calculation of Worldscale rates and time charter equivalents
  • Pipelines and rail - scheduling, tariffs, logistics
  • Oil Storage - types of storage, contract terms, costs, evaluation of opportunities, implications of holding inventory (tax, reporting)

Forward Curves and Market Structure

  • Effects of contango/backwardation on trading behaviour - inventory management, hedging, trading opportunities
  • Contango and backwardation and their causes; economic theories of forward curves
  • Financial modelling of oil price behaviour - Black-Scholes and other frameworks

Advanced Trading / Financial Engineering

  • Delta hedging
  • Monetisation of physical flexibility
  • Dealing and origination
  • Algorithmic and high-frequency trading

Trading Controls, Ethics & Compliance

  • Constraints on trader activity: government regulations, corporate policy, trading limits
  • Trading ethics, insider trading, market manipulation
  • Measurement and control of trading exposure, including Value at Risk and credit controls
  • Regulation of oil trading: exchanges, OTC markets and price reporting

During the course, delegates get hands-on experience of many aspects of trading through team exercises covering:

  • Crude oil trading for refinery supply and for profit
  • Trading to maximize the value of refined products storage
  • Hedging oil production using swaps and options
  • Contract negotiation
  • Evaluation of product blending opportunities
  • Freight rate calculation
  • Refinery hedging
  • Hedging with futures
  • Trading ethics

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