Energy Markets Final Exam questions
and answers graded A+
contract of affreightment - correct answer ✔✔ -agreement to transport a specified quantity of
product at a specified weight per metric ton between a specified loading and discharging port.
In COA, no particular vessel is specified
-
Free on Board (FOB) - correct answer ✔✔ - a lot of foreign crude oil is sold FOB.
-buyer or charterer pay the cost of marine transport, insurance, unloading and discharge port
costs. Title is transferred when oil is loading on the ship at loading port
CIF (Cost, Insurance, and Freight) - correct answer ✔✔ seller of cargo is responsible for cost of
transportation and title changes at discharge.Seller has liability until title changes at discharge
World Scale Rate - correct answer ✔✔ -most tankers are priced using world scale rate
- developed from UK and US gov rate systems that were used to price vessels after WW2.
- World Scale first establishes a FLAT RATE a baseline rate is US $ per metric ton
World Scale 100 rates - correct answer ✔✔ - rates adjusted to reflect changes in fuel bunkering
costs, port tariffs and exchange rates.
-rates are established on a region-region basis as well as port to port basis
21 day BFOE - correct answer ✔✔ A paper contract traded for several months ahead for
B/F/O/E with a 21-day notice of a 3-day lifting window. The first 3-6 months are truly liquid.
BFOE refers to Brent, Forties, Oseberg and Ekofisk, 4 North Sea crudes
, 3:2:1 Crack Spread - correct answer ✔✔ also known as a refinery margin spread. Finished
product prices, such as gasoline minus crude oil prices. A refiner might sell the 3:2:1 crack
spread by buying 3 crude oil contracts, selling 2 gasoline and sell 1 heating oil contracts to "lock
in" a proxy for the refining margin.
Aframax tanker - correct answer ✔✔ Average Freight Rate Assessment is a price assessment by
the London Tankers Brokers Association since 1954. Generally 80-120 MDWT. Now a generally
size term, Aframax vessels used to be the largest tankers included in the assessment. LR2 is a
specific type of long range Aframax with tanks coated to carry clean products.
aft of a tanker - correct answer ✔✔ rear of ship.
Amsterdam, Rotterdam and Antwerp (ARA) - correct answer ✔✔ an important location for price
discovery in Europe. Rotterdam is a major reporting center for refined product prices.
arbritrage spreads - correct answer ✔✔ oil prices in one region minus prices for the
same(similar) product in another region. Arbs are primarily a function of transportation rates
between regions. E.g. Jet fuel in NY versus Rotterdam
avails - correct answer ✔✔ term used by refinery operations to speak of availability of certain
crude oil or product. Avails are tight or plenty.
back half of a pipeline cycle - correct answer ✔✔ generally a 10 day cycle in a products pipeline
(say Colonial pipeline) is split into 2 parts, the front phase and the "back phase" or the "back
half" is the last five days, or second half of that particular cycle. Product pipelines usually
schedule shipments up to 30 days in advance.
backhaul cargo - correct answer ✔✔ A tanker cannot travel forward after it has discharged its
crude oil cargo. Ballast, usually sea water, lowers the vessel further into the water which
stabilizes the vessel. Sea water ballast is not required if a return cargo (backhaul) is available.
and answers graded A+
contract of affreightment - correct answer ✔✔ -agreement to transport a specified quantity of
product at a specified weight per metric ton between a specified loading and discharging port.
In COA, no particular vessel is specified
-
Free on Board (FOB) - correct answer ✔✔ - a lot of foreign crude oil is sold FOB.
-buyer or charterer pay the cost of marine transport, insurance, unloading and discharge port
costs. Title is transferred when oil is loading on the ship at loading port
CIF (Cost, Insurance, and Freight) - correct answer ✔✔ seller of cargo is responsible for cost of
transportation and title changes at discharge.Seller has liability until title changes at discharge
World Scale Rate - correct answer ✔✔ -most tankers are priced using world scale rate
- developed from UK and US gov rate systems that were used to price vessels after WW2.
- World Scale first establishes a FLAT RATE a baseline rate is US $ per metric ton
World Scale 100 rates - correct answer ✔✔ - rates adjusted to reflect changes in fuel bunkering
costs, port tariffs and exchange rates.
-rates are established on a region-region basis as well as port to port basis
21 day BFOE - correct answer ✔✔ A paper contract traded for several months ahead for
B/F/O/E with a 21-day notice of a 3-day lifting window. The first 3-6 months are truly liquid.
BFOE refers to Brent, Forties, Oseberg and Ekofisk, 4 North Sea crudes
, 3:2:1 Crack Spread - correct answer ✔✔ also known as a refinery margin spread. Finished
product prices, such as gasoline minus crude oil prices. A refiner might sell the 3:2:1 crack
spread by buying 3 crude oil contracts, selling 2 gasoline and sell 1 heating oil contracts to "lock
in" a proxy for the refining margin.
Aframax tanker - correct answer ✔✔ Average Freight Rate Assessment is a price assessment by
the London Tankers Brokers Association since 1954. Generally 80-120 MDWT. Now a generally
size term, Aframax vessels used to be the largest tankers included in the assessment. LR2 is a
specific type of long range Aframax with tanks coated to carry clean products.
aft of a tanker - correct answer ✔✔ rear of ship.
Amsterdam, Rotterdam and Antwerp (ARA) - correct answer ✔✔ an important location for price
discovery in Europe. Rotterdam is a major reporting center for refined product prices.
arbritrage spreads - correct answer ✔✔ oil prices in one region minus prices for the
same(similar) product in another region. Arbs are primarily a function of transportation rates
between regions. E.g. Jet fuel in NY versus Rotterdam
avails - correct answer ✔✔ term used by refinery operations to speak of availability of certain
crude oil or product. Avails are tight or plenty.
back half of a pipeline cycle - correct answer ✔✔ generally a 10 day cycle in a products pipeline
(say Colonial pipeline) is split into 2 parts, the front phase and the "back phase" or the "back
half" is the last five days, or second half of that particular cycle. Product pipelines usually
schedule shipments up to 30 days in advance.
backhaul cargo - correct answer ✔✔ A tanker cannot travel forward after it has discharged its
crude oil cargo. Ballast, usually sea water, lowers the vessel further into the water which
stabilizes the vessel. Sea water ballast is not required if a return cargo (backhaul) is available.
