Oil Trading Manual: A comprehensive guide to the oil markets

964 Pages·2003·25.13 MB·English

by  David Long

Oil Trading Manual
David Long,
Editor
WOODHEAD PUBLISHING LIMITED
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Oil Trading Manual
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OTM
Oil Trading Manual

Formerly edited by David Long
Cambridge England
Published by Woodhead Publishing Ltd,

Abington Hall, Abington,

Cambridge CB1 6AH, England.

www.woodhead-publishing.com

First published 1995

Supplement 1 March 1996

Supplement 2 June 1996

Supplement 3 May 1997

Supplement 4 March 1998

Supplement 5 June 1998

Supplement 6 October 1998

Supplement 7 September 2000

Supplement 8 May 2002

© 1995, 1996, 1997, 1998, 2000, 2002 Woodhead Publishing Ltd

Conditions of sale

All rights reserved. No part of this publication may be reproduced or transmitted

in any form or by any means, electronic or mechanical, including photocopy,

recording, or any information storage and retrieval system, without permission in

writing from the publisher.

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library.

ISBN 1 85573 074 X

ISSN 1365 3210

Printed by Astron On-Line, Cambridgeshire, England
Contents

Contributors
Abbreviations
Introduction
Acknowledgements
Index
Part 1: Characteristics

1 The trading of oil
David Long
1.1 Why oil is traded
1.2 Trading characteristics of oil
1.3 Structure of the oil market
2 Physical characteristics and refining
Hugh Quick
2.1 Introduction
2.2 Uses of oil products
2.3 Pricing
2.4 Properties of oil products
2.5 Crude oils
2.6 Oil refining
2.7 Environmental factors
2.8 Measurement, sampling and testing
Appendix
Supplement 8 May 2002
Contents

3 Oil pricing arrangements
Catherine Hamer
3.1 Types of pricing mechanism

3.2 Fixed prices

3.3 Floating prices

3.4 Applying pricing mechanisms

3.5 Sources of price information

Part 2: Instruments and

markets

4 Crude oil markets
Petroleum Argus
4.1 Introduction

4.2 North Sea

4.3 Mediterranean

4.4 West Africa

4.5 United States

4.6 Middle East

4.7 Asia Pacific

4.8 Latin America

Appendix

5 Product markets
Petroleum Argus
5.1 Introduction

5.2 Europe

5.3 United States

5.4 Asia Pacific

Appendix

6 Futures and forward contracts
Sally Clubley & David Long
6.1 Introduction

6.2 What are futures and forward contracts?

6.3 The pricing of futures and forward contracts

6.4 How are futures and forward contracts used?

6.5 Conclusions

vi Supplement 8 May 2002
Contents

7 Forward paper markets
David Long
7.1 Introduction

7.2 Structure and organisation

7.3 Europe

7.4 United States

7.5 Arab Gulf and Far East

7.6 Future developments

Appendix

8 Oil futures exchanges
Sally Clubley
8.1 Introduction

8.2 The oil futures exchanges

8.3 Delivery procedures

8.4 Options on oil futures

8.5 Clearing mechanisms

8.6 Future developments

9 Options
David Knox
9.1 Introduction

9.2 What is an option?

9.3 Using options

9.4 Pricing options

Appendix

10 Swaps
David Long
10.1 Introduction

10.2 What is a swap?

10.3 Pricing swaps

10.4 Using swaps

10.5 Future developments

Supplement 8 May 2002 vii
Contents

11 Long dated oil markets
Frédéric Barnaud & Philippe Lautard
11.1 Introduction

11.2 Market participants

11.3 Market liquidity

11.4 Trading instruments

11.5 Pricing models

11.6 Contractual issues

11.7 Using long dated derivatives

11.8 Conclusions

Appendix

Part 3: Administration

12 Operations and logistics
Robin Burley
12.1 Introduction

12.2 Scheduling

12.3 Bookouts

12.4 Nomination and documentation

12.5 Inspection

12.6 Demurrage

12.7 Shipping operations

12.8 Terminals, trans-shipment and storage

Appendix

13 Credit control
Catherine Jago
13.1 Why is credit control necessary?

13.2 Assessing credit risk

13.3 Limiting financial exposure

13.4 Methods of credit monitoring

Appendix

viii Supplement 8 May 2002