Module 1: PRICING AND MARKET STRUCTURE
*08:00 -10:15 (with 15 min break)

This course explains how oil is priced in commercial contracts and how this creates
risk. We will then examine market structure (the shape of the forward curve of prices)
and how this affects pricing and risk.
Pricing and structure will be tied to together to examine storage of oil, premiums and
differentials, and arbitrage plays.

Key elements:
– Price reporting agencies
– Floating prices and fixed prices
– Futures contracts and predictions
– Contango and Backwardation
– Structure and trading: contango storage, premiums and arbitrage
*30 min break

Module 2: FUTURES, SWAPS AND HEDGING
*10:45 – 13:00 (with 15 min break)

This course will look at price risk in oil trading and how to deal with that risk. Dealing
with risk means hedging and we will examine how hedging works.
We will explain the major derivatives: futures, forwards and swaps and how they relate
to the forward curve. We will use exercises to show how hedging works. We will also
discuss how these derivatives are used for trading and speculating.

Futures are a key derivative which is often used to directly price physical oil; we will look
at this mechanism, the EFP.

Finally, we will discuss how traders derive prices using diƯerentials and spreads.

Key elements:
– Assessing price risk: long, short, neutral
– Key derivatives: what are futures, swaps and forwards?
– Exchange of Futures for Physical
– Cracks spreads and diƯerentials
– OSP’s and premiums in trading

Module 1: OPTIONS AND HEDGING
*08:00 -10:15 (with 15 min break)

After a quick review of the basic derivatives (futures, swaps and forwards) we will
explain options:
1) How does an option work, and how is it valued?
2) What is a call?
3) What is a put?

Options can be daunting because of the math and the vocabulary. This module will
present options as simply as possible, avoiding complex math and explaining the jargon
in layman’s terms.
We will look at how options can be a trading tool and a hedging mechanism.

This module will focus on client-based options for producers and consumers.
Finally, we will discuss exotic options; what are they and why are they “exotic”?

Key elements:
– Calls and puts
– European, American and Asian options
– Black-Scholes option pricing model
– Volatility: historical, actual and implied
– Caps and floors
– Collars, spreads, three-ways, and leveraged options
– Exotic options
**30 min break


Module 2: HEDGING, PRICING AND RISK MANAGEMENT WORKSHOP
*10:45 – 13:00 (with 15 min break)

The previous 3 modules built the bases for understanding and managing risk. This final
module uses realistic scenarios and simulations for applying this understanding. We
will work together to solve hedging and pricing problems on crude oil and products. The
exercises will include the use of swaps and futures to calculate prices and hedge price
risk.
The number and diƯiculty of the exercises will depend on the participants. The module
will last 2 hours including time for questions.

Exercises (possible):
– Calculating cargo values using swaps: Gasoil from Jamnagar (India)
– Calculating delivered prices and making trading decisions: Jamnagar to West Africa
– Trading gasoil with an EFP: risks and hedging: Gasoil FOB Ventspils (Latvia in Baltics)
– DiƯerential swaps: Jet DiƯ and Diesel DiƯs in Europe
– DiƯerential Risk, Arbitrage and EFP: Trading Jet from Kuwait to Rotterdam
– Gasoline Arbitrage: Europe vs. US market

***The class is interactive and live. Questions are welcomed throughout and webbased whiteboards will be used to demonstrate where required. Time may be allocated
for examples suggested by participants in addition to prepared exercises.

2 Day Full Course – OIL TRADING: PRICE RISK, HEDGING, DERIVATIVES : 1150 GBP
Please note: UK-based companies are subject to 20% UK VAT

The course fee covers:
– Participation in 8 hour Live Virtual Course
– The Course materials in e-version
– Industry Certificate of IBH: 8 CPD hours

Payment options are available in two forms: bank transfer and card payment.

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