Course dates
The course includes:
- Overview of crude oil demand and supply
- Who are the key players in the crude oil market
- Analysis of typical crude oil qualities by region
- Overview of the main crude oil trade flows
- Introduction to refining processes
- The relationship between crude oil and oil product prices
- Crude oil chemistry and oil specifications
- Reading a crude oil assay
- Calculation of crude oil yields and netbacks
- Calculating of Gross Product Worth and refining margins
- How refiners value base load and opportunity crudes
- Overview of the spot market and the term contract market
- The use of pricing benchmarks: past, present and future
- How the pricing agencies operate
- Contractual arrangements in trading of physical oil
- How crude oil is transported
- The crude oil derivatives markets
- Relationship between physical and derivatives markets
- Hedging and basis risk
- Sources of price data
- Regulatory Issues and Taxation
Course overview
This is a three day course covering everything your team needs to know about how oil is traded and priced in the international market. The course covers the valuation and pricing of physical cargoes of crude oil, as well as how derivatives such as oil futures and swaps are structured.
Who should attend
- Banks with a presence in the commodities markets
- Swaps sales and marketing staff
- Regulatory and taxation authorities
- Oil refiners including planning and scheduling executives
- Marketing executives at National Oil Companies
- Independent exploration companies
- Oil and commodities traders
- Business development staff at futures exchanges
- Fund managers
- Private equity executives
- Lawyers/accountants/insurers needing to understand oil valuation
Day 1
Session 1: The Geopolitics of Crude Oil Demand and Supply
- Distribution of Oil Reserves
- OPEC and non-OPEC production
- Where oil is refined and consumed
- Trade Flows
- Regional Analysis of typical crude oil qualities
Session 2: Introduction to Refining Processes
- Distillation of crude oil
- Oil Products: Finished and Intermediate
- Conversion operations
Session 3: How Refiners Value Crude Oil
- Hydrocarbon chemistry
- Basic crude oil qualities
- The crude oil yield
- Different yield schemes: 4-, 5-, 6- and 7-cut
- Base load and opportunity crudes
Exercise: Each team will calculate the crude oil yield of a crude from its distillation curve
Session 4: Some Basic Calculations
- Calculating Crack Spreads
- Calculating Gross Product Worth
- Calculating Yields and netbacks
- Modelling the Refining margin
Exercise: Each team will calculate the Gross Product Worth based on supplied oil product prices
Session 5: Crude Oil Qualities
- Reading a crude oil assay
- Understanding the whole crude specifications
- Detailed quality of individual crude oil fractions
- How particular specifications affect the market value of a crude oil
Case Study: Teams representing sellers and buyers of a crude oil will evaluate a crude oil assay and make presentations on its advantages and disadvantages
Day 2
Session 1: Pricing crude oil
- Introducing the spot, term and futures markets
- Relationship between the spot market and the term contract market
- How oil companies determine balance of spot and term
- Relationship between the spot market and futures markets
Session 2: Pricing Benchmarks
- The evolution and use of pricing benchmarks
- Traditional benchmarks (Brent, Dubai, WTI etc)
- The future of benchmarks in the oil market
- How the pricing agencies operate
- Introducing crude oil futures markets
Exercise: Each team will make an assessment of the spot price based on pricing data provided
Session 3: Contractual arrangements in trading of physical oil
- Writing a crude oil contract
- Key parameters of an oil deal
- General Terms & Conditions
- Quality, Timing, Volume
- Pricing basis, Delivery point
- INCOTERMS
- Optionalities for buyer and seller
- Other parameters
Session 4: Crude Oil Transportation
- Economics of Pipeline versus Tanker Transportation
- Oil choke points and security of supply issues
- The Worldscale System
- Tanker fixtures and time charters
Exercise: Each team will calculate the freight cost of two crude oil tanker voyages using the Worldscale system and evaluate which is cheapest
Session 5: The Crude Oil Derivatives Markets
- Forward markets
- Futures markets
- Options
- Swaps
Session 6: Hedging
- Relationship between physical and derivatives markets
- Hedging and basis risk
- Price long, price neutral and price short
- Example of hedging using futures and swaps
Case Study: Each team will evaluate a crude oil pricing scenario, determine if they are long or short and evaluate the hedging opportunities available
Day 3
Session 1: Recent Trends in Oil Prices
- Light/heavy crude oil spreads
- Sweet/sour differentials
- Seasonal trends
- Scheduling: spot and term barrels
Session 2: Real-world oil price data
- Platts and Argus
- The oil futures exchanges: CME/ICE
- Brokers
- Other sources of price data
Session 3: Regulatory Issues
- Market regulation
- Taxation
- Anti-competition issues
Session 4: Course Recap
- Summary/recap of course sessions
- Revision questions
Case Study: Trading simulation in which teams of buyers representing oil refiners compete with teams of sellers representing oil producers for a selection of crude oils
Course summary and close
Singapore Hotel, Singapore, Singapore
This programme takes place on a non-residential basis at a central Singapore hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Peter Stewart
Peter Stewart has been an oil analyst and oil consultant for the last 25 years. Most recently he has worked as Principal Consultant with KBC Energy Economics, a division of the refining consultancy KBC which he joined in September 2007 after 20 years at energy and commodities pricing agency Platts. His work at KBC focussed on providing consulting and market analysis of the oil and gas markets, including crude valuations and marketing studies for international oil and gas companies, and feasibility studies for large refinery projects. He has provided regular crude and oil products market commentaries and analysis for KBC Global Energy Outlook service, including a range of weekly, monthly, quarterly and annual publications. He left Platts in 2007 as director of pricing and markets, with global responsibility for price assessments and coverage of oil, gas, coal and related commodities. He has worked in Tokyo, Hong Kong, Singapore, Dubai and London.
Peter is a frequent speaker on energy-related matters at industry conferences and on radio/television, and he has written a number of books with a business focus. Peter holds a Joint Honours degree in English and Arabic Studies from Emmanuel College, Cambridge in the UK. He is currently engaged in academic research on commodity pricing mechanisms in the energy economics department at Surrey University in the UK.
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
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Course dates