International Oil Trading and US Arbitrage 03 December 2008, New York, USA

International Oil Trading and US Arbitrage
3 December 2008, USA

If you trade with the States or plan to start supplies of crude oil and products to the USA market, or if you are a trader based in the US, this event will assist your business development. Though the project was tailor-made for a few delegations of Russian oil major suppliers and traders it is open to other European and Middle East traders and American market players.

This seminar is designed to provide senior oil trading management with a high level understanding of the key drivers of international oil trading and arbitrage, with particular focus on oil products and US markets. To reinforce the transfer of knowledge, the presentations covering key issues will be interspersed with a series of straightforward syndicate exercises. The style of the seminar will be participation and interaction between all concerned.

Colin Allcard and Konstantin Babourine, both seasoned oil industry professionals and experienced presenters, will lead the seminar. Their personal profiles are below.

The seminar will cover the following subjects, an understanding of which are essential to successful implementation and management of international oil trading and arbitrage:
• Market supply/ demand balances and oil flows, recent history and a forward view, reflecting oil price developments
• FSU export patterns and key export markets/ destinations
• Crude oil; main characteristics/ types
• Oil products; main types, key quality characteristics and important market trends
• Oil pricing, price markers, price premiums/ discounts and market differentials
• International arbitrage and drivers
• Shipping; types of tanker, characteristics, chartering, freight calculations, insurance
• Price risk management; essentials tools for successful exploitation of arbitrage opportunities e.g. Futures and Forwards, Swaps, Exchange for Physicals
• Financial instruments use for trading, corporate hedging, capital markets and investments
• Examples of arbitrage opportunities available to Russian Federation oil exporters, identification and key management issues

Throughout, real examples of arbitrage/ oil flows/ hedging actions will be tabled to demonstrate how theory is put into practice and arbitrage profits are secured through sound trading techniques and risk management.

Programme

DAY ONE

Introduction, overview and objectives

Trading and shipping terms, units of measurement, price units

Oil markets and oil trading

Supply and demand; crude oil and oil product markets, arbitrage drivers
Regions, participants, trade flows
Opportunities for Russian and Middle East exporters

Key Issues: International crude and oil products flows and implications for FSU and Middle East exporters – focussing on US markets – and implications for US importers of crude/ main arbitrage products.

Introduction to oil refining/ economics

Crude Oil and Feedstock Categorisation
Key Processes and components produced:

Distillation (atmospheric and vacuum)
Restructuring/Reforming

Conversion/ quality improvement
Economics key issues/ GPW introduction

Key Issues: The key characteristics of refined products and how they are produced by refinery processes/ by blending operations. FSU main export grades and their applications in end-user markets will also be addressed.

Shipping/ marine freight

Tankers – types and characteristics
Worldscale system/ shipping economics
Chartering/ basic principles
Laytime and demurrage
Insurance, losses, port charges
Freight Futures

Key Issues: How freight costs are calculated, their importance for determining trading economics/ net-back values and the importance of critical charter conditions for oil traders.

Exercise 1: Freight Costs

Oil pricing

Pricing mechanisms
Crude and product markers and formula pricing
Price reporting - methodologies and imperfections
Flat prices, differentials, pricing periods

Key Issues: How oil is priced, simple and complex formulae, specifics for finished products and feedstocks (straight run residues, VGO, and cutter stocks).

Introduction to Derivatives Trading and Risk Management

Financial markets basics and terminology
Measuring and managing risks. Why?
Risk management program design and execution
Characteristics of listed and OTC markets

Key Issues: Identifying key risks around an enterprise and needs to manage them. Key processes in setting up a successful risk management program.

Basic Risk Management Strategies

Hedging with futures and swaps
Plain vanilla option strategies
Strategic and tactical hedging

Key Issues: Using basic financial instruments in simple risk management strategies.

Application of Derivatives in Physical trading – Case Studies

Flat price hedging
Basis Risk
Calendar Spread exposure and term structure
Hedging product in storage

Key Issues: Incorporating derivatives tools into physical trading strategies. Using financial markets for assessment of the physical trade feasibility.

Corporate Risk Management – Case Studies

Refining Margin Hedging
Dynamic Hedging
Indexation
Producer Hedging Structures

Key Issues: Dealing with complex corporate risks in financial markets

Speakers:

Mr. Konstantin Babourine is a Vice-President in Morgan Stanley. His main responsibility is derivatives sales and deal structuring in energy sales, metals and agricultural products across the FSU and Eastern Europe region. He has been working in the energy industry for the past ten years and has been involved in various aspects of derivatives and physical trading of oil products and natural gas. Prior to Morgan Stanley Konstantin worked for Goldman Sachs and BP Integrated Supply and Trading as a Senior Risk Management Marketer in the US and UK. He holds an MBA in Finance from Iowa State University and an Aerospace Engineering Degree from Moscow Aviation Institute, Russia.

Mr. Colin Allcard has over 25 years commercial international oil industry experience, including senior management positions with Shell in oil products and crude oil supply and trading on international markets including US market; downstream marketing and general management experience with highly developed expertise in the retail liquid fuels, lubricants and aviation businesses. He has over 15 years expatriate experience, well versed in operating in developing countries with a wide diversity of cultures. Specific knowledge of the US, Middle East and African countries, direct experience of managing business process redesign projects, change management and of implementing re-organisation programmes.

The participation fee without accommodation is 50 includes:
• Participation in the seminar
• Handout materials in English
• Coctail-reception
• Lunches and coffee-breaks during the seminar