Why You Should Buy This Book
It is a risk management manual that explains in realistic detail the physical oil market internationally, the price formation process and the risk management instruments available to manage price risk- their benefits and their shortcomings.
It provides a detailed description of how to implement physical oil cargo transactions, shipping and pipeline operations and refinery techniques.
Independent oil producers and refiners often adopt different stances on both the merits and methodologies of oil price risk management. Whether or not the independent sector chooses to use them, the book explains the instruments available and provides a step-by-step guide to the trading mechanics. It also discusses some new potential difficulties the independents are encountering in using market instruments in the face of the crystallising US Dodd Frank/Volcker legislation and European EMIR regulations. It examines the unintended consequences for financing oil developments using the forward oil price curve to collateralise debt following the withdrawal of banking market makers, including the sacrifice of equity to major oil companies or the need to pay larger handling fees to trading companies.
It provides comprehensive coverage of the key existing and emerging international oil price benchmarks. This includes a ‘warts-and-all’ analysis of the precarious Brent Blend benchmark on which the price of approximately two thirds of the world’s physical oil and a much larger volume of futures and derivative trades depend.
Understanding Oil Trading: Why bother?
If you are a CEO, CFO, lawyer or auditor, why do you need to plough through all this detailed material?
That’s easy. If you have responsibility for overseeing, litigating or auditing these activities you are not going to find a more comprehensive or more readable guide anywhere else. It is written in layman’s language, but with “get-out” pointers that will let you know when we are getting into detail that is so technical that only the traders need to know.
- This is a trader’s manual examining in detail the contracts available to buy, sell and hedge crude oil. But for lawyers, auditors and other executives it provides the overview necessary to interpret the information provided concerning the trading function.
- Explains the purpose of risk management and what benefits that can provide for a company.
- A comprehensive explanation of oil field financing and hedging the refining margin. Using the forward oil price curve to under-write the corporate budget or the development programme and why some companies choose not to do so.
New Crude Oil Traders
- A detailed description of how to trade and how the various contracts and risk management instruments work.
- Comprehensive deconstruction of industry concepts designed to enable the reader to easily engage with and grasp the components of oil price formation.
- Practical examples to provide the reader with an understanding of the industry they are entering.
- An introduction to understanding the geography of the oil market and how this affects the basic elements of demand and supply.
- War stories from more than thirty years of moving cargoes around the world.
- Explains what motivates traders to trade in the complex way that they do.
- The interaction of the three components of the oil price – A, T and G- and why this can throw up surprising results.
- The regulation of benchmarks- change is underway (e.g. what will the next iteration of the Brent contract look like and when will it be safe to use WTI for hedging international crude again?)
- Regulatory intervention and the law of unintended consequences in the oil market.
Why You Want This Book
This book is for anyone who wants to enhance their industry awareness and career performance with an indepth knowledge of the global oil market and the oil price formation process and contracts. The analysis in this book is grounded on more than thirty years direct experience of this dynamic international market.
Whether you are a senior manager in an E&P, an aspiring trader, a broker, a lawyer, an auditor, or anyone else who is involved in the diverse arena of the oil market, this book will give you a detailed breakdown of the factors affecting crude oil price formation.
Furthermore it will provide you with a profound understanding of all the operational procedures to which you must adhere in order to trade the crude oil market. Not only will it give a comprehensive guide as to how, but also why, financial instruments are such crucial tools in protecting companies and governments against oil price exposure in a volatile and unpredictable market place.