Swaps, the MOPS

Strip, and
Floating Prices
Basic swaps

• Used as a hedging tool to manage physical price exposure

• Usually settle at monthly average of Platts published physical values
• Example:
Refiner wants to lock physical crude oil purchase price at $60/b for Oct
Trades Oct crude swap at $60/b
If Oct physical price eventually averages $61/b, refinery receives $1/b
from swap counterparty, reducing overall crude purchase cost to $60/b
If Oct physical price eventually averages $59/b, refinery pays $1/b to swap
counterparty, increasing overall crude purchase cost to $60/b.

2
Swaps are integral to Platts’ physical
assessments

Platts analyses the value of swaps and other derivatives

markets in physical market assessments around the world

• Singapore fuel oil, gasoil, jet, gasoline

• North Sea crude oil
• West African crude oil
• Middle Eastern crude oil
• Northwest European refined products
• US pipeline refined products
• US fuel oil
To name just a selection

3
Why: Markets often trade on a floating price
basis – a differential to Platts assessments
Asia Gasoline Asia Naphtha Asia Jet

42%
58%

Outright Floating Outright Floating Outright Floating

Asia Marine Fuel 0.5%S Asia Fuel Oil Asia Gasoil

5%

33% 32%

67% 68%
95%

Outright Floating Outright Floating Outright Floating

The ratio of trading on an outright-price basis compared to trading on a floating-price basis in Platts’ core
Asia physical MOC markets in September 2019 to January 2020
Data: Platts
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44
Physical markets trade: outright and floating
prices
• Examples of floating price activity

• Gasoil 10ppm: FOB Straits: Jan 9-Jan 13: 150kb: BP sells to Unipec at MOPS plus
$0.80/b (Deemed pricing Jan 8-14) INCO

• Platts HSFO 180 CST: FOB Straits: Jan 29-Feb 2: 20kt: Trafigura sells to Vitol at
MOPS +$23.00/mt INCO

• Platts HSFO 380 CST: FOB Straits: Jan 11-15: 40kt: Shell sells to PTT at MOPS plus
$20.00/mt

• Platts Marine Fuel 0.5%: FOB Straits: Jan 21-25: 40kt: PetroChina buys from BP at
Jan Avg plus $20.00/mt BPGTC

5
Floating price trades settle value at a later date

Often price settled on and around the loading or delivery date:

• Platts HSFO 180 CST: FOB Straits: Jan 29-Feb 2: 20kt: Trafigura sells to
Vitol at MOPS +$23.00/mt INCO

This trade is likely to settle using the average of Platts’ published assessments
for HSFO 180 CST loading in Singapore, published two days before loading,
on the day of loading, and two days after loading (2:1:2).

A premium of $23/mt will be added to the average of Platts’ assessments

published around the loading date

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66
Floating prices can settle based on a monthly
average
• Price can also be settled using average of assessments for a calendar month

– Platts Marine Fuel 0.5%: FOB Straits: Jan 21-25: 40kt: PetroChina buys from
BP at Jan Avg plus $20.00/mt BPGTC

– A trade at this level would settle using the average of Platts’ assessments
published over the entire month of January for Marine Fuel 0.5%, loading in
Singapore .

– A premium of $20/mt would be added to the average of Platts

assessments for Marine Fuel 0.5% as published in January

7
Core formula underpinning market values

When Platts assesses a physical market, there can be only one value for a cargo
of oil. That value can be expressed as an outright price, and a floating price.
The market reconciles value using the following simple formula:

Outright Price = Settlement basis plus differential

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Valuing a floating price bid, offer or trade

When a bid, offer or deal is made, it is impossible to know:

• Exactly when the cargo will load (or be delivered)
• Publication dates that will be used for settlement (if pricing around
loading/delivery date)
• What prices Platts will publish
Loading and billing is, after all, in the future!

10
Establishing a proxy for valuing floating prices

Outright Price

Basis price for

settlement Floating Price
Swap “strip”

At the time of trade, outright and floating

both demonstrate value

11
Back to that FOB Straits floating price trade

– Platts Marine Fuel 0.5%: FOB Straits: Jan 21-25: 40kt: PetroChina buys from
BP at Jan Avg plus $20.00/mt BPGTC

– The final value of this trade will settle based by adding $20/mt to the average of
Platts’ assessments published over the entire month of January for Marine
Fuel 0.5%

– The Marine Fuel 0.5% Swap will also settle using the average of Platts’
assessments published over the entire month of January for Marine Fuel 0.5%

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VALUATION OF A FLOATING
PRICE OVER:

A CALENDAR MONTH AVERAGE

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13
Valuing floating offer over calendar month
average
Outright Price

Sw = 598.00 Diff = +20.00

Platts Marine Fuel 0.5%: FOB Straits: BP offers Jan Avg +20.00 Jan 21-25 40kt BP GTC
Px = Sw + Diff
Hedgable value of outright offer: $618.00

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14
Valuing outright bid over calendar month average

Outright:592.00

Sw = 598.00 Diff

Platts Marine Fuel 0.5%: FOB Straits: Vitol bids 592.00 Jan 21-25 20kt INCO
Px = Sw + Diff
Implied floating price of bid: Jan Avg minus $6/mt
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15
Simultaneously translating outrights and floating

BP offers $618 BP offers Jan

(hedgable) + $20

Vitol bids Jan

Vitol bids $592
- $6
(implied)
January Marine Fuel 0.5% SWAP VALUED AT $598/mt

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16
Another way to look at it
620
618 Platts FOB Singapore 0.5% Marine Fuel Cargo Swaps - 26Dec19

616 Singapore 0.5% change time spread $/mt

614 BP offers Jan Avg +$20 BalMo*Dec 19 NA NA
612 M01 Jan 20 598.000 +13.750
M02 Feb 20 588.000 +13.500 Jan/Feb 10.000
610
M03 Mar 20 578.750 +13.000 Feb/Mar 9.250
608 M04 Apr 20 570.250 +12.300 Mar/Apr 8.500
606 M05 May 20 562.500 +11.300 Apr/May 7.750
604 M06 Jun 20 556.000 +10.300 May/Jun 6.500
M07 Jul 20 550.750 +9.700 Jun/Jul 5.250
602 M08 Aug 20 546.000 +8.200 Jul/Aug 4.750
600 M09 Sep 20 542.750 +7.450 Aug/Sep 3.250
598 M10 Oct 20 540.000 +6.450 Sep/Oct 2.750
596 M11 Nov 20 538.350 +5.800 Oct/Nov 1.650
M12 Dec 20 537.350 +5.700 Nov/Dec 1.000
594
592
590 Vitol bids $592
588
586
584
582 January February
580
January Marine Fuel 0.5% SWAP VALUED AT $598/mt
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17
VALUATION OF A FLOATING
PRICE OVER:

AVERAGE AROUND
LOADING/DELIVERY

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18
What is a strip?

• Any contiguous date series referred to in derivatives

• trading

• Q1 Strip: January-February-March

• Calendar Year Strip: Jan-Feb-Mar-Apr-May-Jun-Jul-Aug-Sep-Oct-Nov-Dec

• Summer Strip: Apr-May-Jun-Jul-Aug-Sep

• Platts Singapore HSFO Strip: May 20-June 4: (on May 5)

19
Floating prices: Singapore FO 380CST, Dec 20
2019
PLATTS HSFO: PHYSICAL BIDS FINALS ON CLOSE (380 CST):

• Platts HSFO 380CST: FOB Straits: Trafi bids MOPS +8.00 Jan 4-8 40kt INCO OR

• Platts HSFO 380CST: FOB Straits: Trafi bids Jan Avg +4.00 Jan 5-9 20kt INCO

• Platts HSFO 380CST: FOB Straits: PetroChina no longer bids MOPS +12.00 Jan 4-8 20kt INCO after trade with Gunvor
(4:26:22.631)

PLATTS HSFO: PHYSICAL OFFERS FINALS ON CLOSE (380 CST):

• Platts HSFO 380CST: FOB Straits: Shell no longer offers MOPS +12.00 Jan 4-8 20kt after trade with Trafi (4:09:53.883)

• WD: Platts HSFO 380CST: FOB Straits: Total withdraws offer MOPS +13.00 Jan 10-14 20kt Total GTC OR

• Platts HSFO 380CST: FOB Straits: Total no longer offers MOPS +12.00 Jan 15-19 20kt Total GTC after trade with Vitol
(4:10:24.181)

Platts HSFO 380CST Trade Summary: 3 trades

1) Platts HSFO 380CST: FOB Straits: Jan 4-8: 20kt: Trafi buys from Shell at MOPS plus $12.00/mt (4:09:53.883)

2) Platts HSFO 380CST: FOB Straits: Jan 15-19: 20kt: Vitol buys from Total at MOPS plus $12.00/mt Total GTC
(4:10:24.181)

3) Platts HSFO 380CST: FOB Straits: Jan 4-8: 20kt: Gunvor sells to PetroChina at MOPS plus $12.00/mt INCO
(4:26:22.631)

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Key conversions on Dec 20, 2019: Plotting the
strip
Platts Fuel Oil 380CST FOB Singapore Swaps - 20Dec19
294.00 293.5
BMo*Dec 19 NA NA
M01 Jan 20 293.500 +23.450 292.00
M02 Feb 20 285.500 +18.700
M03 Mar 20 282.250 +16.200
290.00
M04 Apr 20 281.450 +15.400 288.00
M05 May 20 281.000 +14.550
M06 Jun 20 280.700 +13.600 286.00 285.5

Asia PFC Page Index found on PGA601 & PPA2600 284.00

*Balance month swaps are assessed from the 1st to the
282.00 282.25
15th of the month and to the 14th of February.
280.00
January February March
$/b
92 unleaded swap BMo*Dec NA NA M01 Jan 71.350 +1.120 M02 Feb 70.940 +1.010
Reforming spread BMo*Dec NA NA M01 Jan +10.300 +0.320 M02 Feb +11.190 +0.410
Naphtha Singapore swap BMo*Dec NA NA M01 Jan 61.050 +0.800 M02 Feb 59.750 +0.600
Jet swap BMo*Dec NA NA M01 Jan 80.280 +0.980 M02 Feb 80.100 +1.040
Gasoil swap BMo*Dec NA NA M01 Jan 80.850 +1.060 M02 Feb 80.450 +1.020
$/mt
180 CST swap BMo*Dec NA NA M01 Jan 307.450 +23.650 M02 Feb 301.500 +20.750
380 CST swap BMo*Dec NA NA M01 Jan 293.500 +23.450 M02 Feb 285.500 +18.700
Marine Fuel 0.5% swap BMo*Dec NA M01 Jan 599.750 M02 Feb 590.750

Naphtha Japan swap M01 Jan 554.000 +12.500 M02 Feb 542.500 +11.000 M03 Mar 533.500 +10.000

*Balance month swaps are assessed from the 1st to the 15th of the month and to the 14th of February.

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21
Drawing the Strip: Singapore FO 380CST, Dec 20
2019
301.00

299.00
The average of the dates will be the published Strip
Every day in the Strip has a unique value
297.00

295.00
293.5
293.00

291.00

289.00

287.00
285.5
285.00

283.00
January February March
Assessed physical loading dates: Jan 4- Jan 19

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Calculating the Strip: Dec 20 2019, 380 CST HSFO

Mid MOPS Strip 11.5th -4 days

Mid Jan 15.5th 30 days
Mid Feb 14.5th (Leap Year)

M1 $293.50/mt January
M2 $285.50/mt February
M1 – M2 $8.00/mt Jan/Feb
Daily structure (M1 – M2)/(mid M1 to mid M2 days) = $0.2667
M1 + (daily structure * mid strip to mid M1
MOPS Strip days) = $294.57/mt

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23
Visualizing MOC: Dec 20 2019, 380 CST HSFO
Assessed physical loading dates: Jan 4- Jan 19
HSFO 380 CST Bids, Offers On Close
311.00
HSFO 380CST: B1) FOB Straits: Trafi bids MOPS +8.00 Jan 4-8 40kt INCO OR
309.00 S1 S2 HSFO 380CST: B2) FOB Straits: Trafi bids Jan Avg +4.00 Jan 5-9 20kt INCO
HSFO 380CST: B3) FOB Straits: PetroChina no longer bids MOPS +12.00 Jan 4-8 20kt
307.00 INCO after trade with Gunvor (4:26:22.631)
B3 S3 HSFO 380CST: S1) FOB Straits: Shell no longer offers MOPS +12.00 Jan 4-8 20kt after
trade with Trafi (4:09:53.883)
305.00
WD: HSFO 380CST: S2) FOB Straits: Total withdraws offer MOPS +13.00 Jan 10-14 20kt
303.00 B1 Total GTC OR
HSFO 380CST: S3) FOB Straits: Total no longer offers MOPS +12.00 Jan 15-19 20kt Total
301.00 GTC after trade with Vitol (4:10:24.181)

299.00
297.00
B2
295.00
293.5
293.00
291.00
289.00
287.00 285.5
285.00
283.00
January February March
Platts HSFO 380CST Trade Summary: 3 trades
1) Platts HSFO 380CST: FOB Straits: Jan 4-8: 20kt: Trafi buys from Shell at MOPS plus $12.00/mt (4:09:53.883)
2) Platts HSFO 380CST: FOB Straits: Jan 15-19: 20kt: Vitol buys from Total at MOPS plus $12.00/mt Total GTC (4:10:24.181)
3) Platts HSFO 380CST: FOB Straits: Jan 4-8: 20kt: Gunvor sells to PetroChina at MOPS plus $12.00/mt INCO (4:26:22.631)

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Valuing floating orders: Dec 20 2019, 380 CST
HSFO
Jan 4-8: 20kt: Gunvor sells to PetroChina at MOPS plus $12.00/mt INCO
Mid MOPS Strip 11.5th -4 days
Mid Jan 15.5th 30 days
Mid Feb 14.5th (Leap Year)

M1 $293.50/mt January
M2 $285.50/mt February
M1 – M2 $8.00/mt Jan/Feb
Daily structure (M1 – M2)/(mid M1 to mid M2 days) = $0.2667

M1 + (daily structure * mid laycan to mid M1 days)

Outright value + premium = $308.03/mt

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25
Assessment at Close: Dec 20 2019, 380 CST HSFO
Assessed physical loading dates: Jan 4- Jan 19
311.00 Asia Products $/mt
309.00 S1 S2
Platts Fuel Oil 380CST FOB Singapore - 20Dec19
307.00 B3 FO 380 CST 3.5% 305.74-305.78 305.760 +27.630
305.00
S3 MOPS FO 380 294.55-294.59 294.570 +23.980
FO 380 3.5%*** 11.17/11.21 11.190 +3.650
303.00 B1
301.00 ***Indicates relationship between premium and
299.00 relevant MOPS strip

297.00 B2
295.00
293.5
293.00
291.00
289.00
287.00 285.5
285.00
283.00
January February March
Platts HSFO 380CST Trade Summary: 3 trades
1) Platts HSFO 380CST: FOB Straits: Jan 4-8: 20kt: Trafi buys from Shell at MOPS plus $12.00/mt (4:09:53.883)
2) Platts HSFO 380CST: FOB Straits: Jan 15-19: 20kt: Vitol buys from Total at MOPS plus $12.00/mt Total GTC (4:10:24.181)
3) Platts HSFO 380CST: FOB Straits: Jan 4-8: 20kt: Gunvor sells to PetroChina at MOPS plus $12.00/mt INCO (4:26:22.631)

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That assessment, triangulated

Asia Products $/mt

Platts Fuel Oil 380CST FOB Singapore - 20Dec19
FO 380 CST 3.5% 305.74-305.78 305.760 +27.630
MOPS FO 380 294.55-294.59 294.570 +23.980
FO 380 3.5%*** 11.17/11.21 11.190 +3.650

***Indicates relationship between premium and Outright Price: $305.76/mt

relevant MOPS strip

Sw = $294.57/mt Diff = +$11.19/mt

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And finally…

• Why does the market apply premiums or discounts to published

benchmark prices?

• Quality differences
• Locational differences
• Terms and conditions differences
• Most importantly: timing differences

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Drawing the Strip: Oct 23 2019, Marine Fuel 0.5%
Assessed physical loading dates: Nov 7- Nov 22
500.00 FE: Nov 7-11; MW: Nov 12-16; BE: Nov 17-22
499.00
THE ISSUE OF TIMING
498.00 A cargo loading on Nov 20 would price using assessments published on and around Nov 20
Platts’ assessments on Nov 20 reflect cargoes loading between Dec 5 and Dec 20
497.00
In a contango market, the value of future-loading cargoes is higher than cargoes loading today. A
496.00 discount to published assessments would therefore be common.

495.00

494.00

493.00

492.00

491.00 FE MW BE

490.00
October November December

Companies will typically bid, offer first, middle or last five days
(Can bid, offer any five days)

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29
Drawing the Strip: Dec 20 2019, 380 CST HSFO
Assessed physical loading dates: Jan 4- Jan 19
311.00 FE: Jan 4-8; MW: Jan 9-13; BE: Jan 14-19
309.00
307.00
305.00 THE ISSUE OF TIMING
A cargo loading on Jan 6 would price using assessments published on and around Jan 6
303.00 Platts’ assessments on Jan 6 reflect cargoes loading between Jan 21 and Feb 5
301.00
In a backwardated market, the value of future-loading cargoes is lower than cargoes
299.00 loading today. A premium to published assessments would therefore be common.
297.00
295.00
293.5
293.00
291.00
289.00
287.00 285.5
285.00
283.00 FE MW BE
January February March
Jan 4-8: 20kt: Gunvor sells to PetroChina at MOPS plus $12.00/mt INCO
Jan 15-19: 20kt: Vitol buys from Total at MOPS plus $12.00/mt Total GTC

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QUESTIONS
AND
DISCUSSIONS
3
Private & Confidential 1