Virtual Course: Oil Trading: Price Risk, Hedging, Derivatives

This two day course is composed of four modules covering pricing, risk and hedging of oil trades.  Each module lasts two hours with time allotted for questions and answers.  

The Module 4 is fully interactive with exercises and simulations using realistic data and trading scenarios in the oil markets. The delegates will look at how to hedge the physical positions, considering when to hedge, which is the best instrument to hedge with, and what basis risks they must live within real trading.

Participants are expected to have a basic knowledge of oil markets and price mechanisms. 

COURSE AGENDA

DAY 1

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 are often used to directly price physical oil; we will look at this mechanism, the EFP.

Finally, we will discuss how traders derive prices using differentials 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 differentials
• OSP’s and premiums in trading

DAY 2

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.  

How does an option work and how is it valued? What is a call?  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 three 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 solving hedging and pricing problems on crude oil and products.  The exercises will includes use of swaps and futures to calculate prices and hedge price risk. 

The number and difficulty of the exercises will depend on the participants.  The module will last two 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)
• Differential swaps: Jet Diff and Diesel Diffs in Europe
• Differential 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 web based white boards will be used to demonstrate where required.  Time may be allocated for examples suggested by participants in addition to prepared exercises.

CERTIFICATION:

 On successful completion of this training course, a 8 CPD Credit IBH Certificate will be awarded to the delegates 

COURSE FEE

2 Day Full Course - OIL TRADING: PRICE RISK, HEDGING, DERIVATIVES : 990 GBP

25-26 May 2023 | Virtual Course | Zoom Delivery

Starts at: 8AM London | 12PM Dubai | 4PM Singapore

Ends at: 1PM London | 5PM Dubai | 9PM Singapore

 The course fee covers:

• Participation at 8 hour Live Virtual Course
• The Course materials in e-version
• Industry Certificate of IBH: 8 CPD hours

Oil Trading: Price Risk, Hedging | Registration Form

BESPOKE SOLUTIONS & OTHER QUESTIONS:

Contact Us To Discuss Running This Course for Yourself or Your Organisation: T:+44 (0) 207 183 4507 | E. office@ibhouse.net