Crude & Refined Products


Your Challenges

Accurately modelling spot and forward prices of crude, including being able to capture negative prices

Valuing structured products on crude futures and calculating risk sensitivities (including Greeks)

Accurately modelling refinery spreads such as between RBOB or ULSD and Brent

Analyzing the optimal mix of swaps, futures and options to hedge your crude and refined products portfolio

Managing and quantifying risks from price changes in crude oil and risks of changes in exchange rates as well as managing potential volume and quality risks from the production of crude oil

Explaining the day on day changes in the reported risk metrics when the portfolio consists of hundred’s of curves

We Understand Your Market

Oil, like many other commodities, goes through cycles of supressed and hyper volatility in both price and demand. Market players with crude oil and refined products exposure, either as a producer, refiner or a large purchaser, need to adhere to sound risk management principles to ensure continued profitability in volatile markets.

Both trading and risk management require a timely, accurate and comprehensive software solution in order to conduct pre-deal analysis, structure a deal appropriately, as well as risk manage the portfolio. As the oil market becomes increasingly competitive and, once healthy trading margins are reduced, the need for good pricing and risk management is more important than ever.

Our Solution

Lacima offers two solutions for Crude & Refined Products valuation market participants: Lacima Trader and Lacima Analytics – providing a solution from structuring and trading, to risk management of oil and product portfolios. Lacima understands the specific requirements of oil operators, including marketers, refiners, and exploration and production (E&P) companies. We can handle structures that include complex pricing features of oil such as crack spreads and index-based deals.

Lacima’s solutions use the same consistent models and methodologies to capture the unique market characteristics whilst providing the comfort of stress testing and scenario analysis tools to analyse future uncertainty.

Whether you are in Trading, Structuring & Origination or Risk Management, use Lacima’s solutions to accurately value both financial contracts and physical assets and support key decision making by leveraging Lacima’s risk solutions to gain deep insights into the drivers of risk and how they change through time. Lacima calculates the full range of market and credit risk metrics including Earnings-at-Risk (EaR) and Revenue-at-Risk (RaR), as well as more standard risk management metrics such as Value-at-Risk (VaR) and Potential Future Exposure (PFE), for superior trading and risk management results.

Oil and refined product Traders, Structurers, and Risk Managers can enjoy a range of benefits including:

  • Assess the relevant risk metrics based on portfolios of physical oil assets as well as complex oil contracts
  • Analyse hedging strategies to best manage your oil exposure either as a producer, refiner or large consumer
  • Understand the most relevant models to capture the unique inter-relationships of oil and refined products prices
  • Assess valuation frameworks that accurately value long-term oil contracts which involve complex formulae
  • Capture all the parameters of complex derivative contracts such as index spreads, crack spreads and locational spreads
  • Value refining operations via simulation
  • Value and optimise the flexibility of transporting oil and refined products through pipeline, truck, rail, vessel or barge
  • Analyse large books of oil and refined products derivative deals
  • Undertake scenario analysis such as “what-if” deals, stress testing on prices or volumes, and other model parameters
  • Understand your VaR drivers and the effect that trades within your portfolio have on your overall VaR and changes with VaR attribution
  • Report company-wide risks across your assets and drill down to individual regions, products, trading desks or even trader to really understand your risks and sources of value