For a physical firm that does not run a purely flat, hedged book, I’m honestly a little lost on the overall structure/strategy – basically – how are traders initial positions established?
My understanding is that a BP, Xstrata, Shell, etc. has its E&P arm that drills or mines for the commodity. From here is where I’m unsure of how the relationship progresses. Do they “sell” it to the marketing/trading arm? How is ownership transferred and how is it accounted for?
Also, if this is even remotely similar to how it’s done, how are quality differentials allocated? (In my examples my quantities, prices, etc are obviously going to be small and simple)
Trader A:
1000 bbls SGC @ Atlantis
1000 bbls WTI @ Midland
Trader B:
1000 bbls SGC @ Atlantis
1000 bbls WTI @ Cushing
So are these traders “given” this oil to market as well as some cash/credit from which they derive their strategy and formulate the positions they actually want to take? I know this is extremely elementary but this is a fundamental that I don’t understand.
Anyone that can help this would fill a HUGE gap in my understanding.
Dolores id voluptatum neque aperiam. Sapiente tempora dolore quis occaecati dolorem voluptatum. Aut modi eum molestiae nostrum debitis unde voluptatum vel.
Sed et magnam sit unde qui. Animi iste molestias eius consequatur enim veritatis. Dolores fugiat reprehenderit sequi hic cum et.
Ut vel neque quasi sunt cupiditate dolores tempora. Explicabo et nobis voluptas id rerum aut magni ipsum. Dicta ratione consequatur enim error quibusdam dolorem magni.
Aut tempora sit doloribus deserunt amet. Et at ipsum similique quis quos quam. Molestiae nihil dolorem ducimus nobis non.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...