Asset-Backed Trading & Hedging for Oil, Gas, Power, & LNG (VIRTUAL) - ABTV

Asset-Backed Trading & Hedging for Oil, Gas, Power, & LNG (VIRTUAL) - ABTV

Course Summary

This course is designed for commodity traders and related professionals seeking to enhance their practical knowledge of valuation, hedging, and risk management for long-term contracts and physical assets in dynamic energy markets. Through practical case studies and discussions, delegates will explore the strategies used by leading energy trading organizations to optimize assets and manage risk. The focus is on the application of these concepts from a practitioner’s perspective, without delving into the intricacies of quantitative model developmen

The course will cover embedded optionality and trading strategies for optimizing storage, transportation (ground and marine), and long-term contracts across gas, power, and oil markets. Cross-commodity spread strategies will be examined in the context of power generation and oil refinery operations. We will also explore the valuation, hedging, and optimization of natural gas, LNG, and refined product storage strategies in various market conditions.

Course Content

Foundations of Asset-Backed Trading and Real Options

This module introduces the core concepts of valuing and hedging physical assets and long-term contracts as real options.

• Understanding the various types of real options
• Grasping commodity trading fundamentals in terms of transformation
• Distinguishing real options from standard financial options
• Identifying intrinsic and extrinsic value components
• Applying optimization and re-optimization strategies
• Learning practical position management and monetization techniques
• Mapping the risk of real options to equivalent financial positions
• Analyzing a practical case study on optionality in LNG trading

Understanding Energy Price Dynamics for Trading Decisions

This module provides a practical overview of energy price behavior and forward curve dynamics, essential for informing trading decisions.

• Analyzing forward curve behavior in energy markets
• Gaining an overview of spot price model concepts and their influence
• Understanding multi-factor and multi-commodity insights for integrated trading
• Applying practical insights from price dynamics to trading and hedging strategies

Transportation and Location Arbitrage Strategies

This module focuses on the "transformation in space" aspect of commodity trading, exploring strategies related to transportation and locational differences.

• Understanding pipeline and transportation options
• Analyzing locational basis relationships in energy markets
• Applying basis swaps for price fixing and hedging transportation risk
• Executing cargo arbitrage with practical considerations
• Reviewing a case study on natural gas locational basis trading
• Differentiating between various capacity services
• Understanding Financial Transmission Rights (FTRs) and Congestion Revenue Rights (CRRs)

Storage Optimization and Hedging

This module delves into the "transformation in time" aspect, focusing on the valuation, optimization, and hedging of storage assets.

• Optimizing storage utilization in different market conditions
• Exploring specific natural gas storage time spread and trading strategies
• Implementing practical hedging strategies for storage assets
• Calculating the intrinsic value of storage
• Understanding the extrinsic value of storage and spread options
• Analyzing a case study on storage hedging and operational risk

Transformation in Form: Blending and Processing Assets

This module explores the "transformation in form" aspect of commodity trading, covering optionality embedded in processing and blending operations.

• Identifying optionality in production processes
• Valuing power generation assets and understanding spark/heat rate spreads
• Analyzing refineries and crack spreads for hedging and speculation
• Reviewing a case study on hedging and speculation with crack spreads
• Understanding the complete LNG value chain transformation

Risk Management for Physical Assets

This module focuses on the critical aspects of market, credit, and operational risk policies and metrics specifically for physical assets in energy trading.

• Establishing effective risk governance and limits
• Developing robust market risk and hedge policies
• Applying asset-specific market risk metrics like VaR and flow 'at-risk' measures
• Analyzing a case study on gross earnings at risk for a power plant
• Measuring and managing credit risk and potential future exposures
• Identifying and mitigating operational risk in physical assets
• Managing volumetric risk and its relationship with operational risk
• Addressing challenges when hedging physical exposures with financial forwards

Course Wrap-up