Mastering Oil Trading Concepts - OTO2 

CPE Credits Awarded: 24
Categories: Trading, Derivatives, Hedging and Risk Management, Oil Industry, Oil Supply and Trading

Course Date Duration Venue Price Register by Date Register
28 Nov 2017 3 Days London, UK Country: gb
£ (GBP)2,125.00+20%VAT
27 Oct 2017
29 Jan 2018 3 Days Houston, TX Country: us
$ (USD)3,200.00
29 Dec 2017

5c003d5e591091d484ea3c6e8f6051f1150 150This three-day workshop is designed to follow the popular Oil Trading Orientation (OTO) course.  Mastering Oil Trading Concepts (OTO2) builds on the basics learned to extend your understanding of the complex world of oil trading and take your skills to a higher level.  

Topics explored during the course include crude oil valuation and selection, products valuation, blending and trading, pricing mechanisms and methodologies, practicalities of hedging and futures trading advanced trading and financial engineering, forward curves and market structure, trading controls, ethics and compliance.

A key element of the course is that you get the chance to put the knowledge learned into practice through a series of fast-paced, educational and enjoyable team trading simulations.  These exercises are designed to reinforce and extend your learning from the class.

Please note: a laptop and Excel version 2007 or later is required in order to engage in market data.

Delegates should have already attended the Oil Trading Orientation (OTO) course, or have a similar level of knowledge to that class.

Class delegates include anyone who needs to know more about trading, including those at the very beginning of an oil trading career as well as non-traders wishing to know more about the world of oil trading, including support staff, analysts, accountants and management in the areas of trading, supply, risk management, credit, finance, contracts, IT, operations, transportation and storage.

Crude Oil Valuation & Selection

  • How refineries evaluate different crudes – comparing crudes using LP models and netback calculations, marginal values, transportation and other logistical considerations
  • Crude oil quality differences between different regions; crude oil blending
  • Crude oil yields for different refinery configurations
  • Assessing crude differentials – what affects grade differentials and how to assess them;  monitoring and analysing differentials and basis

Products Valuation, Blending and Trading

  • Effects of refinery process choices:
    • Feedstock selection
    • Product output objectives
    • Typical yields from different units; process flexibility and effects on product quality
  • Economics of product blending:
    • Quality of different blendstocks and their valuation
    • Evaluating product value
    • Linear/non-linear blending calculations
    • Minimizing quality giveaway
    • Implications of biofuel blending
  • Arbitrage trading:
    • Evaluation of arbitrage opportunities

Pricing Mechanisms and Methodologies

  • Pricing mechanisms for spot and term contracts:
    • OSPs & tenders – different pricing formulas used in different regions
    • Calculations of discounts, premiums and quality escalators
  • Sources of price information:
    • Review of key information sources in different markets
    • Price reporting methodologies, including Platts e-window process
    • Assessments of illiquid markets, including calculations of dated Brent

Freight & Logistics

  • Freight costs and shipping economics
  • Factors to consider when chartering a vessel
  • Bottlenecks and key areas of delay, including demurrage considerations
  • Freight rates - calculation of Worldscale rates and time charter equivalents
  • Pipelines and rail - scheduling, tariffs, logistics
  • Storage
    • Types of storage
    • Standard contract terms
    • Costs
    • Evaluating storage opportunities
    • Implications of holding inventory (tax, reporting)

Crude Forward Markets

  • How forwards are used
  • Brent (BFOE) market, including bookouts, nominations, contract terms and timeline
  • Partials markets for BFOE and Dubai

Futures Trading Practicalities

  • Exchanges and their trading platforms
  • Contract specifications and termination rules
  • Margining systems and rules, including SPAN, scanning and intermonth ranges etc.
  • Cash flows involved in opening, holding and closing futures positions
  • How physical delivery and cash settlement work for oil futures contracts
  • Market open, close, settlement, trade at settle, minute markers
  • EFP and EFS deal process:  what is agreed, how they are invoiced, why and when they are used

OTC Derivatives Markets

  • Types of instruments: swaps, basis swaps, options
  • Common indices and settlement rules
  • Trading platforms, clearing and settlement in OTC trading
  • Use of CFD/DFL/BFOE/ICE to manage Brent price risk
  • Use of swaps/EFS/EFP to manage Dubai price risk

Practical Hedging

  • Basis risk, hedge efficiency, correlation and hedge ratios
  • Hedge accounting
  • Impact of market structure on hedging
  • Aim and purpose of short-term (operational / tactical) hedges
  • Price exposure, pricing mechanisms, priced and unpriced trades
  • Timing of hedging decisions
  • Management of basis risk: basis swaps, EFP
  • Aim and purpose of strategic hedges
  • Hedging a continuous flow business, with and without asset flexibility, including hedging a refinery
  • Hedging horizon, timing and approach
  • Hedging oil production
    • Impact of tax / royalty / PSAs
  • Hedging end-user purchases

Advanced Trading / Financial Engineering

  • Delta hedging
  • Monetisation of physical flexibility
  • Dealing and origination
  • Algorithmic and high-frequency trading

Forward Curves and Market Structure

  • Effects of  contango/backwardation on trading behaviour
    • Inventory management
    • Hedging
    • Storage play opportunities
  • Formation of forward curves
    • Cost of carry
    • Discounting of risks
  • Financial modelling of oil price behaviour
    • Black-Scholes assumptions
    • Random walk and mean reversion

Trading Controls, Ethics and Compliance

  • Constraints on trader activity
    • Government regulations
    • Corporate policies
    • Position and market risk limits
    • Credit and counterparty constraints
  • What is allowed, and what is ethical?
    • Insider knowledge
    • Market manipulation (wash trades, squeezes, quote stuffing, etc.)
    • Speculative position taking
  • Measurement and control of trading exposure
    • VAR and VAR limits
    • Position limits
    • Loss limits
  • Regulation of oil trading
    • Exchange trading and position limits
    • OTC trading and clearing: EMIR, Dodd Frank Act
    • Price reporting: voluntary code and European regulation on benchmarks

During the course, delegates get hands-on experience of many aspects of trading through team exercises covering:

  • Crude valuation, including netback calculations and pricing mechanisms/grade differentials
  • Contract negotiations
  • Evaluation of product blending opportunities
  • Hedging, including delta hedging
  • EFP and margin calculations
  • Forward curve modelling
  • Trading ethics

In addition a multi-faceted trading simulation will run throughout the course to build on the topics and knowledge covered.


Nigel Harris & Mary Jackson


If you have attended a past course please provide us with some feedback.

UK: (+44) 1865 250521   |   USA: (+1) 713 343 1699   |   Singapore: (+65) 6722 3845


Email us at

logos logos bac2 logos logosfacebooklinkedintwitter
   The Oxford Princeton Programme, Inc. is not affiliated with Princeton University, Oxford University, or Oxford University Press.