Month: March 2010

Any simultaneous purchase or sale of crude oil against the sale or purchase of oil products. These spreads represent refining margins.

This is the most important parameter that defines the profits of oil refineries around the world. It is the gap between the price of the different refined products and that of crude oil. Refinery is a process whereas the long crude oil molecules are split by heating to produce a variety of products such as petrol for cars, diesel for trucks and heavy duty vehicles, fuel oil for industrial purposes, jet fuel or kerosene, LPG, heating oil and asphalt.

Let us assume that a barrel of crude oil costs $100. If the refined product that is produced from it is sold at $120, then the crack spread is $20, but if this is very small, the oil refinery will incur losses as it will not be able to covers its fixed costs and pay the interest on its loans.

The crack spread is very volatile, mainly because the price of crude oil is volatile whilst that of the refined products are less so. Oil refineries require a lot of time to roll over between the price of the crude oil and the refined products and so even when the price of crude oil falls, they are in no hurry to reduce the price of the refined products out of concerned that the price of the crude will increase once again quickly.

The volatility of the crack spread is the number one risk to the profits of the oil refineries. In order to reduce the risks, refineries trade in the “spread” via financial tools in order to hedge their risks. Other traders and speculators use the same kind of tools to try to make profits from oil refineries.

The existence of these financial tools enables to obtain an updated picture of the refinery profits on each day that the financial markets are active.

A term for oil and natural gas that occurs in an extensive reservoir and is not necessarily related to conventional structural traps

A storage facility for natural gas at room temperature

wearing away by friction. A rotary oil-drilling method in which abrasive material under pressure rotates ahile being pressed against the rock.

An energy efficient reforming process that uses heat generated from combining partial oxidation and catalytic sream reforming in a single step.

A black to dark brown Bitumen that melts above 1100c.

Any solid, dark brown bitumen that is either dissolved or dispersed in crude oil. Asphaltenes are are large complex molecules, often with molecular weights in the many thousands, composed of carbon, hydrogen, oxygen and other heteroatoms.They are responsible for most of the color of crude any and heavy oils.

In a natural gas sales agreement, properly nominated gas is the amount of gas that is nominated by the buyer to the seller, subject to Force Majeure or scheduled maintenance on each day during the supply period, and which the seller must make available for delivery at hourly rates pursuant to the agreed GSA nomination procedure between the parties.

GSAs usually include minimum levels of nominations allowed, with a delivery tolerance in the range of +/‑ 2% in a day and +/‑ 1% in a month. The minimum aggregate of all nominations is often either zero or greater than 50 mmcfd. The seller however can be asked to use reasonable endeavors to deliver at rates less than this minimum.