Crude Oil Trading and Risk Management

Course Code: CO-TRM

Course Overview

This 4-day course covers all aspects of crude oil trading and marketing, including how refiners value
crude oil, the qualities of crude oil, yield models and margin calculations, and how physical and
futures trading of crude oil are connected.

Scope
This 4-Day programme provides a detailed knowledge of the trading of crude oil and how the value of the refined petroleum products derived from crude oil affect the values of the feedstock.
The course follows a logical order looking at the fundamentals of crude oil supply, the structure of a physical crude oil transaction, how refiners make a valuation of the different grades competing in the market, how the deal parameters such as quality, timing, location, quantity and logistics affect the physical transaction, the derivative instruments available for trading crude oil on a speculative basis and for hedging; and perhaps most importantly, how the value of physical crude oil and the futures, options and swaps that are traded as derivatives interact.

The drivers of crude oil prices in relation to refined products prices are explained, as well as the
changing drivers of market volatility, and how these are relevant to trading and risk management.
The basic structures of commodity trading are systematically introduced, including physical,
forwards, futures, options and swap markets. The course explains the role of trading in ensuring the efficient flow of goods between producers and end-users; the structure of oil and their pricing are explained, and how the main benchmarks provided by agencies such as Petroleum Argus are used.

The programme provides hand-on exercises that allow delegates to confidently use volume, mass
and energy conversion factors; to understand the quality specifications of different types of crude oil and their suitability for the various end-users; as well as basic commercial calculations such as crack spreads, Gross Product Worth, margins, and differentials. The course simplifies and explains the jargon and technical terms used in the oil market. This is a highly interactive course which uses hands-on exercises and visual aids to help delegates retain what they learn.

Delivery
The course is delivered over four days and is divided into 8 modules. Each module takes around 1.5 hours to complete, so around 3 hours per day of tuition and exercises (2 modules per day). Each day has a clear focus covering first, crude oil pricing and how quality specifications affect the price; crude oil contracts and the logistics of trading crude oil, including transportation; how the physical and derivatives markets interact; crude oil valuation from a refiner’s perspective; risk management and hedging; and how to lock in margins through time and location arbitrage.

Objectives
• Gain broad perspective of global oil business from crude production to oil products consumption
• Understand how physical crude oil contracts are structured
• Master the calculations that you need to understand GPW, GRM, crack spreads; oil transportation
costs; as well as arbitrage calculations
• Understand the trading and pricing structures for crude oil and master the calculations you need to negotiate prices relative to benchmarks within contractual structures.
• Understand the system of crude oil benchmarks and differentials, including how the Dated Brent,
Oman/Dubai and WTI/LLS prices are calculated.
• Be aware of risk management and the basic structures for hedging crude oil sales and purchases,
and for locking in a trading margin.
• Confidently discuss the technical terms, concepts and buzzwords with your peers and clients

Topics Covered Include
• Crude oil chemistry and qualities
• How a refiner views crude oils
• Regional grades
• Benchmark-related pricing
• Crude oil transportation
• The five dimensions of a crude deal
• Writing a crude oil contract
• Hedging and price risk management
• Trading logistics and demurrage
• Interactive exercises and simulation

Who should attend?
Crude oil marketers, traders; refining industry planners; banking, finance execs; lawyers,
accountants; oil company graduate trainees; power companies with exposure to oil prices; refined
product end-users. Banks with a presence in the commodities markets; swaps sales and marketing
staff; regulatory and taxation authorities; oil refiners; National Oil Companies; independent
exploration companies; oil and commodities traders; business development staff at futures
exchanges; fund managers; private equity executives.

Course Director
Peter Stewart is a highly experienced analyst in the oil and gas markets, and he written extensively
on the energy transition. Before setting up Resource Economist, he worked in senior positions at
leading energy consulting and business information companies including S & P Global Platts, Interfax and KBC Energy Economics. He a director of the British Institute of Energy Economics and a member of the BIEE Council. He has co-edited a number of editions of the OIES Oxford Energy Forum and has worked as an associate /advisor with a number of consulting firms. Peter is an expert in the trading of oil and gas, having worked for nearly 20 years with the pricing agency Platts, in London, the Middle East and Asia. Peter is a frequent speaker on energy matters at industry conferences and in the media, and has written a number of books with a business focus. He began his career as a journalist having graduated in English and Oriental Studies from Emmanuel College, Cambridge

For course details and PDF please click on the link below:

Crude Oil Trading and Risk Management

Crude Oil Trading and Risk Management

Course Overview

This 3-day course provides a comprehensive overview of Crude Oil pricing and risk management strategies. Each day has a clear focus covering first, the Crude Oil volatility and the value chain risk landscape from oilfield to refinery; benchmark pricing methodologies (Brent, Oman/Dubai and WTI), crude oil differentials and market structure; hedging of benchmark and differentials; and risk management monitoring and strategy, including VaR and other quantitative tools for risk evaluation, mitigation, monitoring and reporting. Each of the three days is sub-divided logically into manageable sub-topics to facilitate retention of the knowledge imparted during the course.

Learning Objectives

• Understand the system of crude oil benchmark pricing and differentials
• Understand how PRAs calculate Dated Brent, Oman/Dubai and WTI assessments
• Know the basic structures for hedging crude oil sales and purchases
• Become familiar with crude oil futures, options and swaps and their use in hedging
• Master the calculations you need to manage risk relative to benchmarks
• Understand how to lock in a trading margin using derivatives
• Track GPW, GRM, crack spreads and transportation costs
• Confidently discuss the technical terms, concepts and buzzwords with your peers and clients

Course Modules

• Crude oil benchmarks and their use in physical and derivatives pricing
• How crude oil deal parameters affect differentials to benchmarks
• Identifying Risk Exposure: Drivers and Measurement of Crude Oil Volatility
• The Crude Oil Derivatives Markets: Futures, Options, Swaps
• Hedging and the Basic Principle of Risk Offsetting
• Locking In Arbitrage Using Derivatives
• Risk Management Strategy and Hedge Ratios
• Hedging Crude Oil Refining Margins
• Risk Measurement, Monitoring and Reporting

Who should attend?

Crude oil marketers, traders; refining industry planners; banking, finance execs; lawyers, accountants; oil company graduate trainees; power companies with exposure to oil prices; refined product end-users. Banks with a presence in the commodities markets; swaps sales and marketing staff; regulatory and taxation authorities; oil refiners; National Oil Companies; independent exploration companies;  oil and commodities traders; business development staff at futures exchanges; fund managers; private equity executives.

Course Director

Peter Stewart is a highly experienced analyst in the oil and gas markets. He was a director of the British Institute of Energy Economics (2013-2021) and has written extensively for the Oxford Institute of Energy Studies and the Oxford Energy Forum. He runs the training and consulting firm Resource Economist Ltd, and has worked as associate with a number of large consulting firms including IPA Advisory Ltd and KBC Energy Economics. He has been an expert advisor to the energy ministries of Norway and Angola on oil trading. Peter has many years’ experience in the trading and pricing of oil and gas, having worked for nearly 20 years with the pricing agency Platts, in London, the Middle East and Asia. Peter is a qualified executive leadership coach and is accredited with the European Mentoring and Coaching Council. Peter has written a number of books with a business focus. He graduated in English and Oriental Studies from Emmanuel College, Cambridge in 1982.

Detailed Scope

This 3-Day programme provides a detailed knowledge of crude oil pricing and risk management. The course follows a logical order looking first at crude oil pricing, including how benchmark prices and grade differentials are set; using this to identify risk exposure from price and spread volatility; and then exploring the range of instruments that can be used to mitigate price risk.

The basic structures of commodity trading are systematically explained, including physical, forwards, futures, options and swap markets, and the interaction between the value of the physical crude oils and the instruments that are traded as derivatives.

The course explains how the benchmarks provided by Price Reporting Agencies such as Standard & Poors/Platts and Petroleum Argus are used in settlement of physical and derivative transactions. The drivers of crude oil prices relative to refined products prices are explained, as well as the changing drivers of market volatility, and how these are relevant to risk management.

A comprehensive overview is provided of crude oil price risk management, including quantitative tools for risk analysis; volatility and correlation measures; calculating hedging ratios; risk-offsetting and basis risk; liquidity risk management; modelling portfolio risk; Value-at-Risk (VaR) and other risk measures; and market risk reporting.

Delivery

The course is delivered over three days and is divided into 9 modules. Each module takes around 1.5 hours to complete, so around 4.5 hours per day of core tuition and exercises (3 modules per day). The course can be delivered online or in person at the client’s office. The style of tuition is informal, friendly and highly interactive, with regular recaps of key course material provided. The course simplifies and explains the jargon and technical terms used in the oil market, with hands-on exercises and visual aids used to help delegates retain what they learn. Delegates are encouraged to ask questions at the end of each module. Exercises and questionnaires are provided for overnight scrutiny to allow delegates to consolidate the intensive course materials provided.

 For course details and PDF please click on the link below:

Crude Oil Risk Management – course outline