Course 10 of 20 · Crude Oil Desk Academy

Differential, Location and Benchmark Basis

Stage C, Market analysis. Level 6 of 10.

Why grades trade at differentials, decomposing basis, and trading location and grade spreads.

116 chapters · 11 modules · every chapter one 8 to 10 minute explainer · builds on: Course 03, Course 04, Course 09

Enrol or enquire See the 116 chapters
How a chapter is sized

One chapter is one idea taken to the point of use

Each chapter is a single self-contained explainer of 8 to 10 narrated minutes, covering one idea to the point where you can use it.

Chapters run in order. Each one assumes only what the chapters before it taught, and capability belonging to a later course is named and deferred rather than half-covered.

Curriculum

11 modules · 116 chapters

Open any module for its full chapter list, in teaching order.

M0 The Differential as a Traded Quantity Ch 1-10
  1. What a Differential Actually Is
  2. Flat Price and Basis as Two Separate Risks
  3. Differential, Basis, Spread and Premium
  4. Why a Grade Needs a Reference Price at All
  5. How a Differential Is Quoted in Practice
  6. Reading the Sign: Premium, Discount and the Minus
  7. Where Differentials Become Visible
  8. What a Differential Is Not
  9. Why Differentials Persist Instead of Closing
  10. What This Course Covers and What It Defers
M1 Taking a Differential Apart Ch 11-21
  1. The Five Components of Any Differential
  2. Attributing Value to the Quality Component
  3. Attributing Value to the Location Component
  4. Attributing Value to the Timing Component
  5. Attributing Value to the Freight Component
  6. Attributing Value to Availability
  7. A Worked Decomposition: a Light Sweet Grade
  8. A Worked Decomposition: a Heavy Sour Grade
  9. Reconciling the Components to the Quoted Number
  10. When the Decomposition Misleads You
  11. Stability: Which Components Move and Which Sit
M2 The Quality Component as a Traded Number Ch 22-31
  1. Turning a Processing Advantage into Cents a Barrel
  2. The Sulphur Slice of a Differential
  3. The Gravity Slice and Its Limits
  4. Middle Distillate Yield as a Differential Driver
  5. The Bottom of the Barrel and the Residue Discount
  6. Contaminant Discounts: Acidity, Metals and Salt
  7. Why Two Refiners Price the Same Quality Gap Differently
  8. The Marginal Refiner Sets the Quality Differential
  9. Product Crack Moves and the Quality Differential
  10. A Specification Change and the Repricing of a Grade
M3 Location and the Geography of Basis Ch 32-42
  1. Why One Grade Prices Differently in Two Places
  2. Freight as the Bound on a Location Differential
  3. The Freight Implied Band and Where Prices Sit in It
  4. When a Location Gap Exceeds the Cost of Moving Oil
  5. Landlocked Grades and the Discount of No Exit
  6. Hub Pricing and the Basis to the Hub
  7. Inland Basis Against Waterborne Basis
  8. Load Port Basis Against Discharge Port Basis
  9. Why a Location Differential Inverts
  10. Chaining Location Basis Across Several Legs
  11. Measuring a Location Differential Consistently
M4 Benchmark Basis Ch 43-53
  1. What Pricing Against a Benchmark Commits You To
  2. Defining the Basis Between a Grade and Its Benchmark
  3. Choosing the Benchmark a Grade Should Price Against
  4. When the Benchmark Is the Wrong Reference
  5. Basis for a Grade Far From the Benchmark's Home
  6. The Benchmark's Own Basket and Your Basis
  7. The Inter-Benchmark Spread
  8. Why Basis Moves When the Benchmark Does Not
  9. Official Selling Price Differentials as Administered Basis
  10. Reverse Engineering a Formula Price
  11. Tracking Benchmark Basis Through a Contract Year
M5 Grade Spreads Ch 54-63
  1. The Grade Spread as a Position
  2. Light Sweet Against Heavy Sour
  3. What Moves the Sweet Sour Spread
  4. What Moves the Light Heavy Spread
  5. Regional Grade Spread Families
  6. Substitutable Grades and Spread Compression
  7. Non Substitutable Grades and Independent Differentials
  8. Correlation and Where a Grade Spread Fails
  9. Quoting and Documenting a Grade Spread
  10. A Worked Grade Spread Trade
M6 Location Spreads Ch 64-72
  1. The Location Spread as a Position
  2. Trading a Location Spread Without Moving Oil
  3. Trading a Location Spread by Moving the Cargo
  4. Pipeline Basis as a Traded Spread
  5. The Cross Basin Location Spread
  6. What Closes a Location Spread
  7. What Keeps a Location Spread Open
  8. Grade and Location Combined in One Spread
  9. A Worked Location Spread
M7 The Independence of Basis from Flat Price Ch 73-82
  1. Two Prices, Two Stories
  2. Flat Price Shocks That Leave Basis Alone
  3. Basis Shocks That Leave Flat Price Alone
  4. Why Basis Reverts and Flat Price Does Not
  5. The Physical Alternative That Anchors a Differential
  6. Comparing Basis Volatility to Flat Price Volatility
  7. When Flat Price Drags Basis With It
  8. Percentage Differentials and Their Hidden Exposure
  9. Reading a Basis Move for What It Tells You
  10. Who Owns Basis Risk on a Desk
M8 Measuring and Tracking Basis Ch 83-93
  1. Building a Differential Time Series
  2. Where Differential Data Comes From and What It Misses
  3. Normalising Differentials to a Common Reference
  4. Normalising for Pricing Period Differences
  5. The Seasonal Shape of a Differential
  6. What a Wide Differential Distribution Means
  7. Setting a Fair Value for a Differential
  8. The Forward Differential Curve
  9. Marking a Differential Position
  10. A Basis Dashboard for One Grade
  11. Five Ways a Differential History Lies to You
M9 Basis Under Stress Ch 94-104
  1. How Basis Behaves When Supply Is Interrupted
  2. Disruption at the Producing End
  3. Disruption in Transit
  4. Disruption at the Destination
  5. Refinery Turnaround and the Local Quality Basis
  6. The Unplanned Outage and the Scramble
  7. A Pipeline Outage and the Stranded Grade
  8. A Freight Shock and Every Location Differential at Once
  9. Buyer Withdrawal and the Formation of a Discount
  10. Demand Collapse and the Differential Floor
  11. Reading the Recovery Path After a Shock
M10 Trading the Differential and the Residual Ch 105-116
  1. The Differential as a Position in Its Own Right
  2. Writing the Thesis Behind a Basis Trade
  3. Expressing a Basis View Physically
  4. Expressing a Basis View on Paper
  5. Sizing and Limiting a Differential Exposure
  6. What It Costs to Hold a Differential Position
  7. The Residual Basis a Hedge Cannot Remove
  8. Residual From a Grade Mismatch
  9. Residual From a Location Mismatch
  10. Residual From a Pricing Period Mismatch
  11. A Full Worked Basis Case
  12. What Basis Analysis Cannot Tell You

The brochure gives each of these 116 chapters a paragraph on what it covers and what you can do once you have worked through it.

This is course 10 of twenty

It stands alone, and it is also the entry point to the Crude Oil Desk Academy pathway.

Enrol or enquire See the whole pathway