Commodity Derivatives Training

What is a commodity?  Although there is no single definition, they are largely unprocessed or semi-processed goods which are either consumed or can be processed and then resold.  However, this definition will not always universally apply; for example, freight and carbon emission markets do not easily fall within this category.   Our commodity derivatives training courses can either be structured to focus on either a single market (e.g. crude oil) or on a theme (e.g. investing in commodities).  This course is offered on an in-house basis and if you are interested please contact us to discuss your specific needs.

Gold

Consider the following statement: “fundamental demand and supply are not the main drivers of the gold price”.  This suggests that if gold production increased it may not necessarily cause a fall in price.  So, what factors impact the price of gold?  One intriguing relationship is how the price of the metal moves in relation to real (as opposed to nominal) interest rates.   Generally, speaking there is an inverse relationship between the two; if there are negative real yields (implying that there is no point in saving money) investors may prefer to hold gold as an investment.   

Topics covered typically include:

• Sources of fundamental demand and supply
• Relationship of gold with exchange rates, real rates and inflation
• Understanding the gold market (e.g. the fixing process, the market for leasing gold)
• Trading strategies (e.g. gold swaps)

Crude oil

How do you like your crude?  Sweet? Sour? Light? Dense?  The term ‘crude oil’ is ambiguous as no two types of crude oil are the same.  The demand for crude oil is refinery demand and over time the industry has classified the different types of crude oil in terms of their physical properties that are relevant to the refining process.  The sulphur content (sulfur for our US readers!) of an oil will be sweet if it less than 0.7% by volume or sour if it is greater than this number.  Another key measure is the density which is based on an API (American Petroleum Institute) gravity measure.  It is an inverse scale with water having an API of 10.  Anything with an API of less than 10 is heavier than water and so will sink in water while an API of greater than 10 means it will float on water.  In the crude oil business crudes with an API of more than 40 are considered ‘light’.  Sweet and light crudes are considered more desirable and should trade at relatively higher prices, although other price factors may influence the final price. 

Topics covered typically include:

• Sources of demand and supply
• Understanding the international flows of crude oil
• Factors impacting the price of crude oil
• Hedging oil refinery exposures
• Refined product hedging strategies (e.g. hedging Jet Fuel exposures)
• Investor applications of crude oil

We can offer commodity derivative training courses on the following underlying assets:

• Gold and precious metals
• Industrial metals
• Natural Gas
• Power
• Coal
• Emissions
• Plastics
• Freight
• Agriculture

One of the company’s principals has written a text book on the subject which is published by Wiley.  The text is available on amazon.com or amazon.co.uk . 

If you are interested in commodity derivatives training on an in-house basis please get in contact!