Physical Oil Trading & Contracts – Winter Edition

1) Oil Trading
– What is trading?
– Who are oil traders and what do they do?
– What is a broker? Why do we use them?
– Market organization: geography and specialization

2) Fundamentals of the Oil Industry
– Exploration and Production: What comes out of the ground?
– Refining: are refineries just black boxes?
– Quick look at refining
– Refining margins and cracks

3) How does the market work?
– How do term and spot contracts change the market?
– Understanding spot deals: Platts and the Market
– Who uses which type of contract?
– FOB vs. Delivered
– Inspection and inspectors:
– Measuring quantity: mass and volume
– Testing quality: typicals, actuals and guarantees
– Test methods
– Legal and contractual value of results

4) Contracts:
– Why do they exist? Who needs them?
– Clauses and terms: understanding how contracts make money
– Key clauses:
– Incoterms
– Quality and quantity
– Delivering timing
– Credit and payment
– Legal clauses: court, arbitration, Force Majeure, GT&C’s
– Disputes and resolutions: best solutions in practice
– What are the risks in physical trading?

5) Timing and Pricing Oil
– What are benchmarks and price references?
– Choosing the right benchmark.
– Price making and price taking: Who sets the price of oil?
– Price Reporting Agencies and the Market Price
– Setting pricing dates: Does timing the pricing matter?
– Differentials and premiums: Why do they exist and how do they work?
– Market structure: how contango and backwardation can change the premium
– Fixed prices, floating prices, EFP and Trigger Prices
– Brent Crude Oil: Dated Brent and WTI
– OSP’s and market prices