Physical Trading and Optimisation of Operational Issues
(11 - 15 November) 

CRUDE MARKETS

• How crude markets work. Global supply and demand.
• Geopolitics and macroeconomics. OPEC, US shale oil, tight oil, new projects
• Pricing and benchmarks. The Brent Complex, BFOE, Dated, ICE Brent
• Pricing regional crudes – the Gulf, West Africa, US and Latin America, Russia and the CIS
• Key production and refining centres, trade flows

                   Exercise:

• Buying and delivering various crudes cargoes (North Sea, Libyan, West Africa, Urals) to a refinery in North-West Europe
• Pricing around B/L dates and monthly averages hedging cargoes, entering into and getting out of positions

IN BRIEF:

• Why some markets can be easier to trade than others
• Political influences: discussion of the Trump and OPEC factors
• How international political dynamics change the market and why basic Supply/Demand is ignored
• How one ‘tweet’ can change the market’s direction Global Oil flows
• Look at the changes in oil flows in the last 10 years
• Discuss where we think the future changes will take us
• Market Drivers: who influences what in oil trading today?
• What is the difference between basic demand/supply versus political issues

TRADING STRATEGIES

• International trading, customer risk, country risk and discuss how to trade better.
• Why is CIF better than FOB
• Maintaining flexibility
• Understanding the implications of market structure on trading positions.
• What is market structure and what do delegates understand by it?
• What is missing?
• Build a strategy to build a market position.
• Clean ‘piece of paper’ trading.
• Speculation... What does this mean, and should it be part of a trading book?

REFINING

• Refining economics.
• Crude selection. Understanding Crude Assay. Assessment crude properties and differentials
• Hedging refining margin
• Various crack spreads: 3-2-1, 5-3-2, 2-1-1

                   Trading simulation:

• Calculating a physical refining margin vs crack spreads
• Hedging refining margin

BLENDING

• Blending – commercial logic
• Repeatability and reproducibility
• Linear and non-linear properties
• Additives in blending
• Calculation of added value through blending

REFINED PRODUCTS 

• Key product markets overview. Quality, supply and demand, key supply routes.
• Regional markets and specifics
  • North West Europe
  • The Med
  • USA
  • Asia-Pacific
  • Other key regional markets
• Refined product trading – key principles
• Pricing, shipping, terminal handling, accumulation and storage
• Hedging refined products
• Use of exchange-traded and OTC instruments

                   Trading simulation:

• Managing a product portfolio
• Doing deals, lifting and delivering tanker parcels, hedging

IN BRIEF:

• New sulphur rules... what impact is felt by Refiners
• The impact of 2020 and climate/environmental pressures
• The role of the Refiner in trading
• How refineries can reach the end user
• How to market your products better

ARBITRAGE AND STORAGE

• Regional supply and demand imbalances and arbitrage opportunities. Arbitrage trading methods and strategies 
• Using transport and storage opportunities in arbitrage deal
• Storage optimisation
• Risks in arbitrage deals – lifting dates and B/L dates, impact on pricing

                   Complex exercise:

• This arbitrage exercise will look at all markets and how to assess the worldwide sales value of 40,000 Mton cargo. The exercise takes into account many shipping values, including tolls. How different markets price their products and why the best price may not yield the best profit.

HEDGING TOOLS – A DETAILED OVERVIEW: USING HEDGING TOOLS IN SPECIFIC CRUDE AND PRODUCT

• Futures, swaps and CFDs
  • Contango / Backwardation / Carry trades with settlement tools/clearing houses
  • Exchanging futures for physicals/swaps: EFP, separate pricing from physical supply, EFS, convert a swap to a futures position
  • Margining futures transactions
  • Speculative trading strategies
• Hedging physical arbitrage deals
  • Choosing the right hedging tool
  • Dealing with brokers and market makers
  • Тrading Brent futures              

                  Exercise:

• Using futures to hedge arbitrage risks
• Monitoring positions and adjusting hedges as lifting sizes and B/L dates change

                  Exercise:

• Modelling price uncertainty
• Selection of a hedging instrument in volatile environment – hedging tools and swaps to reduce impact of price swings

BASIC AND GEOGRAPHICAL SPREADS. TIME SPREADS

• Using spreads to take advantage of a price difference between two or more geographical locations
• Crack spreads and inter product spreads
• Time spreads
• Spreads in backwardation and contango

SHIPPING / DEMURRAGE / WORLDSCALE

• Negotiations and chartering. Managing shipping risks
• Role of B/L in trading operations
• Freight rates, per m/t and lumpsum, AFRA and Worldscale
• Vessel and cargo related risks
• Analysing and negotiating Charter Parties, transhipment, sales contracts on FOB and CIF terms
• Vessel and terminal vetting by majors
• Handling quality and quantity claims
• Dealing with changes during voyage: changes to loading and discharge ports, changes to cargo sizes, vessel replacements, missing laycan, cargo non-readiness, etc.
• Dealing with “pro forma battles” - differences in explicit and implied terms and governing jurisdiction of supply contracts, General Terms and Conditions of majors and key oil traders, Charter-Parties, terminal contracts and GT& Cs

                  Complex Integrated Exercise:

• The exercise calculating the costs of a 50,000 Mton cargo in storage and the use of shipping to help increase profits in a contango market. Why time can also be of benefit?

                  Complex Integrated Exercise:

• This exercise looks at how you start with only 10,000 Mtons, and how a series of trades, trading ideas and shipping increases your P and L without taking anymore risks.