MNL58: Introduction to Trading, Pricing, and Valuation of Crude Oils and Petroleum Products

    Khor, Cheng Seong
    Chemical Engineering Dept., Universiti Teknologi PETRONAS,

    Ricardez-Sandoval, Luis A.
    Department of Chemical Engineering, University of Waterloo, Waterloo, Ontario

    Elkamel, Ali
    Department of Chemical Engineering, University of Waterloo, Waterloo, Ontario

    Shah, Nilay
    Chemical Engineering Dept., Universiti Teknologi PETRONAS,

    Pages: 20    Published: Jan 2013


    Abstract

    This chapter presents a primer on the concepts, systems, and mechanisms of the trading, costing, pricing, and valuation of crude oils and petroleum products. We introduce features of the physical oil and financial paper markets that adopt marker crude oils as pricing benchmarks. To gain a quick appreciation for how the oil markets have evolved, we then present a historical perspective on international crude oil supply, trading, and pricing. Next, we consider the fundamental parameters of the oil markets and the various factors that affect crude oil pricing, including the different sources of price information. We discuss the various mechanisms in which crude oils are priced and how price differentials among different crudes are set to allow the consideration of various important factors. We subsequently extend the analysis to the pricing of petroleum products. Finally, the understanding gained is used to appreciate the roles of costs and profit margins for economic evaluations in the refining industry.

    Keywords:

    Crude oil, petroleum products, trading, physical markets, paper markets, futures, forward, swaps, options, pricing, published prices, valuation, operating costs, capital costs, refinery margins


    Paper ID: MNL5820131213523

    Committee/Subcommittee: D02.04

    DOI: 10.1520/MNL5820131213523


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    ISBN10:
    ISBN13: 978-0-8031-7022-3