Course description
Oil Trading Foundations and Strategies is a VIRTUAL classroom course presented by the energy training experts at Mennta Energy Solutions.
This workshop is ideal for non-traders wishing to know more about the world of oil trading, or for delegates who are at the very beginning of an oil trading. Delegates will learn the terminology and key building blocks of knowledge for crude oil and petroleum product trading. They will also receive a first-hand perspective of what a trader's job involves, through competitive team trading simulations focusing on different aspects of trading and risk management.
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: 4 Hours On-Demand
- Introduction to Trading
- Define what is meant by trading, and the different types of trading participants
- Recognize different reasons for trading, such as supply balancing and trading for profit
- Define how and where people trade, whether directly, using brokers, and through exchanges
- Distinguish between different types of trading instruments, that is spot, term, forwards, futures, options and swaps
- Identify the key controls on traders, including regulatory and risk limits
- Recognize how traders work, how trading departments are organized, and what qualities are needed to be a trader
- Introduction to Commodity Derivatives
- Identify the physical market, the definition of commodity and the key characteristics of commodity transactions
- Recognize how derivatives are broadly categorized
- Recognize the composition of a futures contract and how it is traded
- Identify the rights of an options trader and the flexibility associated with options contracts
- Distinguish between swaps and forward contracts
- Distinguish between over-the-counter options from exchange-traded options
Virtual Instructor-Led Session 1: 2.5 Hours
- Purposes of oil trading
- Reasons for trading
- Approaches to trading and risk appetite by different market participants
- Market fundamentals
- Key trading patterns and locations
- Fundamental analysis – supply and demand trends; imports, exports and trade flows; inventories
- Technical analysis
- Trading strategies, part 1
- Supply trading
- Trading for profit
- Positions (long, short) and spreads
- Exercises
- In breakout groups, delegates answer questions based on market information (news and charts) and trading positions presented on handouts.
- Trading game part 1 to be completed individually after class.
Virtual Instructor-Led Session 2: 2.5 Hours
- Mechanics of trading, contracts and negotiations
- Key clauses in oil trading contracts, including quality, quantity and Incoterms
- Physical deal negotiation
- Pricing mechanisms and use of benchmarks
- Spot and term contracts
- Fixed, floating, OSP and posted prices
- Crude oil valuation: netbacks and quality differentials
- Price sources and reporting methodology
- Crude oil benchmarks: Brent, WTI and Dubai
- Refined product benchmarks
- Trading strategies, part 2
- Price differentials and arbitrage trades
- Product blending opportunities
- Storage plays
- Market structure (contango and backwardation)
- Exercises
- In breakout groups, a contract negotiation exercise where groups must post bids or offers on Platts-type window; and/or a storage trading game.
- Trading game part 2 to be completed individually after class.
Virtual Instructor-Led Session 3: 2.5 Hours
- Risk management, exposure and hedging
- Sources of risk in oil trading
- The concept of price exposure and how to measure it
- Value at Risk (VaR) and its use in trading
- The concept of risk management
- What is hedging?
- Choices of hedging instruments
- Features of OTC and exchange markets, and regulatory frameworks
- Futures and forwards
- Crude oil forward markets
- Futures contracts and exchanges
- Margins and clearing
- Use of EFPs
- Hedging with futures
- Exercises
- In breakout groups, VAR exercise and futures hedging exercise (covering hedging strategy and post-deal analysis)
- Trading game part 3 to be completed individually after class.
Virtual Instructor-Led Session 4: 2.5 Hours
- OTC derivatives
- Features of OTC markets
- Swaps and their use in hedging
- Basis risk & basis swaps
- Options and their use in hedging
- Value drivers & market characteristics
- Crude oil price drivers
- Refined products market price drivers
- Trading market characteristics for different types of crude oil
- Trading market characteristics for refined products including LPG, gasoline, naphtha, jet/kerosene, diesel and heating oil, heavy oils/bunker fuels, feedstocks and specialty products
- Key differences between major international trading markets – North America, Asia Pacific and Europe.
- Oil trading trends
- Exercises
- In breakout groups, a hedging simulation game.
Post Session 4 Self-Study Assignment: 2 hours On-Demand
- Elective course
- Two-hour online course of delegate's choice