Course description
Mastering Oil Trading Concepts is a VIRTUAL classroom course presented by the energy training experts at Mennta Energy Solutions.
This workshop builds on the oil trading basics 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 educational and enjoyable trading simulations. These exercises are designed to reinforce and extend your learning from the class.
This virtual solution is comprised of four live instructor-led sessions hosted on state-of-the-art training software with video, audio, chat, live polls, competitive quizzes, breakout sessions and much more! See recorded demonstrations here. The program will also include several self-study assignments to maximize the time with the instructor.
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Content
Prerequisite to Session 1 Self-Study Assignment: 2 Hours On-Demand
- Hedging with Futures and Options
- Identify why hedging is important in managing volatility in profit and loss
- Distinguish the types of hedges
- Distinguish the differences between using futures and options for hedging purposes
- Identify the problems caused by basis risk and how to deal with them
- Identify the primary hedging strategies used by companies who hedge market risk
Virtual Instructor-Led Sessions: 6 Sessions, 2 Hours per Session
- Futures Trading Practicalities
- Futures exchanges and their trading platforms
- Contract specifications and termination rules
- Margining systems and cash flows involved in opening, holding and closing futures positions
- How physical delivery and cash settlement work for oil futures contracts
- 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
- Hedging Principles
- Sources of risk
- Price exposure, pricing mechanisms, priced and unpriced trades
- Aim and purpose of short-term (operational / tactical) hedges
- Aim and purpose of strategic hedges
- Timing of hedging decisions
- Hedging with futures
- Use of swaps and options in hedging
- Basis risk, hedge efficiency, correlation and hedge ratios
- Management of basis risk using basis swaps and EFPs
- Hedge accounting
- Impact of market structure on hedging
- Hedging the Refinery
- Strategic and tactical objectives
- Basic refinery hedging choices and plan
- Refinery hedging variations
- Refinery hedging choices: operational, opportunistic, strategic
- Hedging and refinery flexibility
- 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
- Storage
- Types of storage
- Standard contract terms
- Costs
- Evaluating storage opportunities
- Implications of holding inventory (tax, reporting)
- 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
- Crude Forward Markets
- How forwards are used
- Brent (BFOET) market, including bookouts, nominations, contract terms and timeline
- Partials markets for BFOET and Dubai
- North American benchmarks
- Products Valuation, Blending and Trading
- Effects of refinery process choices:
- Feedstock selection
- Product output objectives
- Typical yields from different units; process flexibility and effects on product quality
- Economics of product blending:
- Quality of different blendstocks and their valuation
- Evaluating product value
- Linear/non-linear blending calculations
- Mininimizing quality giveaway
- Implications of biofuel blending
- Arbitrage trading:
- Evaluation of arbitrage opportunities
- Effects of refinery process choices:
- 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
- Sources of price information:
- Review of key information sources in different markets
- Price reporting methodologies, including Platts e-window process
- Assessments of illiquid markets, including calculations of dated Brent
- Pricing mechanisms for spot and term contracts:
- Advanced Trading / Financial Engineering
- Delta hedging
- Monetisation of physical flexibility
- Dealing and origination
- Algorithmic and high-frequency trading
- Forward Curves and Market Structure
- Effects of contango/backwardation on trading behaviour
- Inventory management
- Hedging
- Storage play opportunities
- Effects of contango/backwardation on trading behaviour
- Trading Controls, Ethics & Compliance
- Constraints on trader activity
- Government regulations
- Corporate policies
- Position and market risk limits
- Credit and counterparty constraints
- Constraints on trader activity
- What is allowed, and what is ethical?
- Insider knowledge
- Market manipulation (wash trades, squeezes, quote stuffing, etc.)
- Speculative position taking
- Measurement and control of trading exposure
- VAR and VAR limits
- Position limits
- Loss limits
- Regulation of oil trading
- Exchange trading and position limits
- OTC trading and clearing: EMIR, Dodd Frank Act
- Price reporting: voluntary code and European regulation on benchmarks
- Interactive content during the VILT sessions will include:
- Exercises carried out during the VILT sessions, in breakout groups, on product blending opportunities, cargo pricing, crude quality and hedging.
- A multi-round trading game and a competitive hedging simulation game, which would be introduced during the VILT sessions and played by delegates in their own time between VILT sessions.