Principles of International Oil Trading

Course Summary
This course covers the basic principles of international oil trading and the allied fields of supply, transportation and refining. Through the medium of a case study, delegates will address day-to-day problems and will understand the relevant commercial driving forces in this area. Much of the work will be carried out in syndicate groups where teams will simulate real in-company practice, working with other delegates drawn from a wide background of disciplines in the industry. Delegates are introduced to the key elements affecting the international market of oil trading. Crude valuation, ocean tanker transport and freight are explored together with a basic overview of terminals and pipelines. The structure of a refinery will be explained in the context of the need to produce marketable products. Aspects of product quality will be covered together with the key refining processes needed to achieve them.
After reviewing the background of supply, refining and transportation, the course focuses on the key markets, pricing and the mechanisms involved in international oil trading. Aspects of the various exposures encountered in trading are covered together with an introduction to price risk management. Syndicate exercises will address each skill required. Additionally, during the week, delegates are given the opportunity to trade in the current market via a simulation of live trading. There are no pre-requisites for this course, nor is any advanced preparation required.
Please take note of the number of training days listed in the schedule, as it varies with location.
8CPE creditsper training day awarded for this course
What You Will Learn
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The structure of the oil markets - physical and paper

Knowledge of freight costs key to trading

How to evaluate spot tanker freight costs

How oil and tankercontracts are structured

How a refinery is configured

Key points on product quality

How key specifications are met

How crudes and products are priced

How to value crude oil based on product market prices and netbacks

How and why trading is carried out

How to execute a trade

The essentials of constructing purchase/sale contracts

Contract exposures and costs

The use of hedging

Basic tools available for hedging and position management
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Suitability:
Personnel who are entering the international trading market and staff who interface with the trading sector and require a better understanding of trading practice such as management accounting, controllers, treasury or supply functions. Also, those in the legal and banking fields who want a better understanding of trading practice and managers changing disciplines into supply and trading as well as professional personnel inside and outside oil companies interfacing with supply, refining, trading and transportation functions and who need an overview of this sector - such as legal, banking, insurance, finance and production.
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Introduction

• Terms used
  
• Units used
  

Crude Oil and Product Markets

• Why trade?
  
• Supply/demand
  
• Ho- the markets work
  

Crude Oil

• Types
  
• Assay
  
• Yield
  
• Crude value
  
• Calculation of gross product worth and netback
  

The Refinery

• Structure of simple, upgrading and complex refineries
  
• Refinery margins
  
• Processing deals
  

Product Quality

• Key specifications for main grades
  
• Ho- quality specifications are achieved
  
• Cost implications of quality
  

Shipping and Freight

• Freight and Worldscale
  
• Main terms
  
• Demurrage
  
• Tanker characteristics
  

Primary Logistics

• Pipelines, terminals
  
• Losses
  

Contracts

• Oil contract terms
  
• Tanker contracts (charterparty)
  

Oil Markets and Price Risk

• Location and nature of pricing
  
• Crude oil
  

Products

• Forward markets
  
• Futures markets
  
• Derivatives
  
• Liquidity, open interest, margin
  
• Price reporting
  
• Pricing mechanisms
  

Other Risks and Exposures

• Credit control and exposure
  
• Bills of lading and letters of indemnity
  
• Letter of credit
  
• Non performance
  
• Demurrage
  
• Inspection and loss
  
• Brokerage
  
• Insurance
  

Product Trading

• Ho- to sell a cargo
  
• Brokers and traders
  
• Position keeping
  
• Mark to market P&L
  
• Trading strategies
  
• World product markets
  
• Arbitrage
  
• Product specs and quality
  
• Implied values of quality
  
• Intermediate valuation
  

Crude Trading

• The world crude oil markets and ho- they work
  
• Trading strategies, putting on a position/taking it off
  
• Hedging and basis risks
  
• Pricing techniques
  
• Arbitrage
  
• Term deals
  

Futures Markets

• Their operation and use
  
• Margins
  
• Delivery - ADP, EFP
  

Introduction to Advanced Instruments

• Options
  
• CFDs and swaps
  
• Spreads and basis trading
  

Case Studies and Exercises Include:

• Gross product worth
  
• Freight
  
• Refining margin and processing, Netback
  
• Contracts
  
• Quality, blending and value
  
• Handling quality change
  
• Handling operational risk
  
• Negotiating a term crude oil deal
  
• Hedging of term deals