Physical Oil Trading & Contracts

This is an interactive online course with live presentations and open discussions. Participants will share an online Power Point and live white board explanations.      

Participants are expected to have a very basic knowledge of oil markets.    

The course will cover physical oil trading deals and how traders look at contracts and clauses, terms and conditions and market practices.

The goal of all traders is to make money or minimize losses; the first step is to create a deal. All the terms of the contract contribute to profits or losses.  This class will look at a few of those key terms and clauses. As we look at each subject, we will be asking how a trader uses it and how it can help make money.    

DAY 1

 Day 1: Physical Market and Contracts    

1. Trading:  

What is trading?  
Who are oil traders and what do they do?  
What is a broker?  Why do we use them?  
Market organization: geography and specialization    

2. Fundamentals of the Oil Industry  

Exploration and Production: What comes out of the ground?  
Refining: are refineries just black boxes?  
Refining margins and cracks    

3. How does the market work?  

How do term and spot contracts change the market?  
Understanding spot deals: Platts and the Market  
Who uses which type of contract?    

4. Contracts:  

Why do they exist?  
Who needs them?  
Clauses and terms: understanding how contracts make money  
Disputes and resolutions  
What are the risks in physical trading?    

5.  Timing and Pricing Oil  

What are benchmarks and price references?  
Choosing the right benchmark.  
Price making and price taking: Who sets the oil price?  
Setting pricing dates: Does timing the pricing matter?  
Differentials and premiums: Why do they exist and how do they work?  
Fixed prices, floating prices, EFP’s and Trigger Prices    

 DAY 2

1. Identifying risks: How might I lose money?  

Understanding risks: legal risk, operational risk, credit risk, price risk  
A quick look at managing legal, operational and credit risk    

2. Understanding price risk: Long, Short, Neutral  

Vocabulary and Basis of price risk  
Understanding what it means to be long or short.  
How and when are positions created: creating risk profiles    

3.  Managing Price Risk: avoiding losses  

What is hedging?  
What is perfect hedging?  
What hedging isn’t.  
Derivatives: tools for managing price risk    
Futures: trading on an exchange    
Forwards: physical or derivative?    
Swaps: wanna make a bet?    
Options:  not as tricky as you think.    

4.  Market Structure, Premiums and Hedging  

What does it mean for a market to have structure?  
Do forward curves predict the future?  
Contango and Backwardation: bullish or bearish?  
Trading physical oil in a market with structure      

The course includes exercises which will be done as a group or in breakout rooms as smaller teams.  

Questions and Discussions are welcome throughout the course.      

He traded oil and energy in Europe, Africa, the Middle East and Asia during a career that spanned eighteen years. He has worked for an oil major, a top trading company, and investment banks. He has extensive experience in supply and trading for refining systems as well as the challenges of running proprietary physical trading books in Europe, Africa, and Asia.

 

His experience was rounded out with several years of trading derivatives for investment banks in the Asia-Pacific region. Since leaving trading in 2008 has taught finance and trading at top French business schools, presented corporate training in commodities and energy in France and abroad, and consulted with top European companies on trading and contract arbitration. He is bilingual in French and English and resides in the South of France.