• Crude Oil Trading and Price Risk Management

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Course Overview

 

Masterclass 1: Trading International Crude Oil

12th - 13th March 2012

This intensive and highly interactive two-day course is designed to give delegates a better
understand of crude oil trading in a safe environment. Delegates gain exposure, knowledge and
understanding of the workings of the world of crude oil trading and is designed for oil & gas traders. The course is a combination of lecture, syndicate work, case studies and a trading game.

 

Masterclass 2: Price Risk Management and Hedging

14th - 16th March 2012

Due to the highly volatile nature of the price of oil, international trading introduces the risk of large unexpected losses. Price risk management is designed to reduce the price risks associated with trading and introduce an element of certainty. This interactive three-day course is designed to guide delegates through the concept of hedging, allowing them to identify price risk and learn how to manage that risk through different financial instruments.

 

This program is intended for :

• Energy, Oil & gas, Commodity traders
  
• Energy Trading Firms
  
• Trading Managers
  
• Financial, Business & Commercial Analysts
  
• Portfolio & Planning Managers
  
• Oil & Gas Financial Consultants
  
• Oil & Gas Equity Analysts
  
• Oil & Gas Executives in Banking & Corporate Finance
  
• Risk Consultants, Risk Managers
  
• Credit Risk Analysts

 

Benefits:

• ANALYSE the market performance oil and gas investments and their future outlook
• LEARN to trade products in the oil and gas market successfully
• DEVELOP a thorough understanding of the various trading techniques and methods
• IDENTIFY market risk and learn to control them effffectively
• APPLY practical strategies and technical analysis to mitigate risk factor in energy trading
• LEVERAGE on energy derivatives to hedge prices and risk exposure

 

Course Outline

 

DAY 1

Trading markets
Physical
- Spot
- Forwards
- Term
OTC
- Swaps
- Futures
- Options
Forward curves
OTC vs Cleared

 

Supply and demand issues
Crude Oil reserves
Production
Supply and Consumption
Geopolitics and National Oil Companies
Storage

 

Transportation
Tankers
World scale
Pipelines

 

Oil pricing
Pricing mechanisms
Price exposure

 

DAY 2

Crude evaluation and refining
Classification and assay
Gross product worth (GPW)
Simple distillation
Cracking

 

Contracts and trading
Market locations and participants
Contracts
Trading specifications
Price quotation
Trading limits
Settlement and delivery

 

Benchmarks
What is a benchmark?
What makes a grade a benchmark?
Main global benchmarks
- WTI
- ASCI
- Dubai
- Brent
- Tapis

 

Brent
Dated Brent
BFOE – 21 Day
ICE Brent
The EFP premium
CFD’s
Bwave

 

Pricing methodology
Platts
Petroleum Argus

 

Technical analysis
Types of charts
- Line
- Bar
- Japanese candlestick
- Market profile
Support and resistance levels
Trends lines
Major reversal patterns

 

DAY 3

Physical pricing mechanisms
Supply and demand
Crude valuation
Fixed vs. floating vs. EFP

 

Understanding price exposure
Long / short
Marking to market
Pricing structures and correlations
- Brent
- WTI / ASCI
- Dubai
Volatility, normal distribution and standard deviation
 

Identification of risk
Basic principles
Objectives
Basis risk, credit risk, operational risk and volumetric risk
Measuring and analyzing risk
Value-at-Risk (VaR) concept
Long and short hedging
Contango and backwardation
 

Futures - the basics
Features of futures
Expiry cycle
Forward curves
Clearing
Exchange of Futures for Physical

 

DAY 4

Hedging with Futures
 

Basic concepts
- Definitions and terminology
- Profit and loss
- Exercise and delivery
 

Pricing
- Cost of carry
- Contango
- Backwardation
- Basis
 

The clearing house
- What is a clearing house?
- Central counter-party
- Margin
- Exercise and delivery
 

Exchange of futures for physical/swaps (EFP/EFS)
- Increases open interest
- Decrease in open interest
- No change in open interest
 

Trigger pricing and basis trading
- Objectives
- Trigger pricing process
- What is basis?
- Establishing basis differential
- Trading the basis

 

Hedging with Options
 

Basic conceptions
- Definition and termination
- Exercise and delivery
- Rights and obligations
 

Characteristics of options
- Risk and reward
- Profit and loss profiles
 

Principles of pricing
- Options premium
- Intrinsic value
- Time value
- Volatility
 

Basic trades
- Long call
- Short call
- Long put
- Short put
- Gearing
- Hedging
 

Options sensitivities - The Greeks
- Delta
- Gamma
- Rho
- Theta
- Vega

 

DAY 5

Hedging with Swaps
 

Basic structure
- Plain vanilla
- Who’s the buyer, who’s the seller
- Fixed for floating
- Cash flows
 

Different types of swaps
- Differential
- Participation
- Extendable
- Double up
- Swaption
- Prepaid
- Margin or crack
 

Pricing
- Forward curve
- Contango
- Backwardation
- Futures
 

OTC clearing
- Basic principles
- ICE
- NYMEX
- SGX

 

Managing a hedging programme
Establishing trading limits
Monitoring trading positions
Market to market - P&L
Portfolio management
VaR - Value at Risk

Summary and Conclusion