Summary of Content

Summary of Content

  • Introduction and Context Setting. An introduction to the historic patterns of supply, demand and trade in the oil industry with an explanation of the conventional wisdom about how the world will look going forward and what might happen to upset that picture. A preliminary look at how to analyse prices from the traders’ perspective.
  • Logistics of trading crude oil. This chapter gives the reader a detailed understanding of the physical logistics of moving oil in pipeline and in tankers. It explains the contracts, shipping operations, credit security and documentation of the physical market.
  • The Absolute Price of Oil (A). An introduction to the absolute price of oil (A), the first of the three components of the Consilience oil price analytical tool. The benchmark grades of oil, the forward and futures markets.
  • The Time Differential (T). The second component of the Consilience oil price analytical tool. The price of oil varies with its delivery date. This chapter explains the role of the shipping operator in getting hold of oil on the best dates for the trader and in the use of the much misunderstood “CFD” market in establishing the correct value of a physical cargo and in finessing hedges.
  • The Grade Differential (G). The value of different grades of crude oil to a refiner. Some basic chemistry and an introduction to the Gross Product Worth of crude oil and the other factors that influence a refiner’s decision to buy one grade of crude oil rather than another.
  • Hedging the crude oil price. This chapter consolidates the knowledge gained in the first chapters with a detailed look at strategic hedging and oil field financing using the forward oil curve. It explains the role of derivative swaps and options and how to avoid your company going a hedge too far.