Supply Chain Essentials and International Oil Trading and Price Risk Management

Duration:5 DAYS

This course can be taken as a 5-day course or broken up as Unit One (2-days) or Unit Two (3-days).

Unit One provides an essential understanding of the fundamentals of the supply and processing of oil. Delegates will learn how refi neries view and value various crude oils and how the ‘gross product worth’ within the refinery contributes to establishing the market value and choice of crude oils available in the international market place. They will learn how choice of crude affects the resultant product quality from the refinery and how the complexity of the processing hardware impacts on refinery margins. This two day course will provide a valuable lead-in to the International Oil Trading and Price Risk Management offering.

Exercises and extensive debriefs will supplement the presentation material and will allow delegates to improve their understanding of the processing system and the logistics and challenges of scheduling activities.

Unit Two course examines trading economics in depth. Delegates will learn how to negotiate and cost deals, calculate profitability, charter a ship through a broker, and examine the legal and operational aspects of trading. They will also gain the skills to identify and manage risk by using futures, forwards, and over-the-counter markets.

Delegates will make decisions as part of a crude oil and refined product trading team, maximizing profits through an understanding of the economics of trading and the management of the inherent price risks. They will manage their trading book and make decisions using real-time crude oil and refined product markets worldwide from Reuters trading screens and daily price reports from Platts and Petroleum Argus. The corporate position will be marked to market and reviewed daily, with comprehensive debriefs studying the consequences of the decisions made.

WHO SHOULD ATTEND

Unit One will benefit both those currently involved in the downstream marketing and supply trading undertakings and those that are in associated and support functions to these core marketing functions.

Unit Two will benefit anyone coming into trading from elsewhere in the industry; those in supply and marketing functions looking for a wider understanding of the market; those in oil companies, banks, law firms, accountancy practices, the media, and elsewhere who interface with traders and trading. Those moving into oil markets from the financial markets, or elsewhere, will also find this course beneficial.

LECTURE SESSIONS

UNIT ONE: SUPPLY CHAIN ESSENTIALS
(2 DAYS)

CRUDE OIL

  • Types of crude oil
  • Evaluation of crude oils
  • Crude oil markets
  • Crude oil pricing

OIL REFINING

  • Distillation and reforming
  • Treating and conversion
  • Cracking
  • Refinery economics and optimization
  • Blending
  • Refinery margins

LOGISTICS

  • Scheduling oil supply

OIL PRODUCTS

  • Refined product quality and specifi cations
  • Value of quality
  • Downstream Marketing

PROCESSING

  • Processing deals

UNIT TWO: INTERNATIONAL OIL TRADING AND PRICE RISK MANAGEMENT
(3 DAYS)

INTRODUCTORY MATERIAL

  • Introduction to trading and markets
  • Price reporting
  • Pricing mechanisms

CRUDE OIL TRADING

  • International pricing of crude oils
  • Crude oil trading
  • Brent / BFOE market

PRODUCTS TRADING

  • Mechanics of trading products
  • Oil broking
  • Costings
  • Comparing alternative outlets
  • Arbitrage trading
  • Valuing product quality

CONTRACTS AND TRADING

  • Negotiating a deal
  • Writing a contract
  • Calculate the profitability of deals
  • Spread trading
  • Contango and backwardation
  • Legal issues

TENDERING

  • Prepare and evaluate a tender

CHARTERING AND FREIGHT

  • Calculating freight costs using Worldscale
  • Chartering a ship
  • Calculate demurrage
  • Freight exposure and swaps

PERFORMANCE AND CREDIT

  • Client /counterpart risk
  • Documentation

RISK AND EXPOSURE

  • Identifying and minimizing risks in trading
  • Price exposure
  • Separation of price and supply

RISK MANAGEMENT INSTRUMENTS

  • Futures markets
  • Forward markets
  • Swaps and OTC markets
  • Introduction to options
  • Comparison of instruments

RISK MANAGEMENT TECHNIQUES

  • Hedging with futures and swaps
  • Basis risk
  • Refinery margin management

TRADING CONTROLS

  • Mark to market

INSTRUCTORS