s&p global platts price assessment methodology explained · web based daily pdfs platts on the...

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S&P Global Platts Price Assessment Methodology Explained


Platts Price Assessments

Spot Markets / Benchmarks

Platts – An introduction

Q&A

Market on Close - In Depth

Methodology / MOC Principles & Guidelines / Process

Agenda


Enabling the markets to perform with greater

Transparency & Efficiency since

Platts – an introduction



Editorial and market assessments are conducted

with complete Independence & Impartiality



PETROCHEMICALS

BIOFUELS

AGRICULTURE

ELECTRIC POWER

NATURAL GAS OIL SHIPPING

COAL METALS



Linking the chain by providing all participants in the physical and futures markets

with the most reliable source of pricing benchmarks, market news and analytical

information


Platts – an introduction:

…and various delivery formats and options:

Delivery

FORMA

T

DELIVER

Y

Real-time news

and price information

Geospatial data

and maps

End-of-day

market data

Conferences

Newsletters

and reports

Forums

Vendor terminals

Excel Add-In/API

Proprietary

web based

Daily PDFs

Platts On The Net

FTP


Understanding Platts Benchmarks

• Understanding Benchmarks

• Price Assessment Methodology

• Price Assessment Process

• Principles & Guidelines


Benchmark Price Assessments: Key Spot Markets

Houston

ARA

(Amsterdam

Rotterdam

Antwerp)

Singapore


Amsterdam / Rotterdam / Antwerp (ARA)


Why is Amsterdam / Rotterdam / Antwerp (ARA) so important

One of the world’s busiest

ports and Europe’s refining

and petrochemical hubs

with around 2.2 million

barrels/day of refining

capacity

A major logistics hub –

pipelines, rivers, publically

accessible storage tanks –

it’s a deep water port

capable of discharging the

largest vessels in the world

It’s a key import and export

location open to multiple

market participants


Benchmark Price Assessments Market requirements

Benchmarks are used as reference points in commodity trading and to derive related commodity prices. They

• Achieve convergence between market values and published values

• Provide full transparency

• Display responsible behavior

• Fully reflect market value


Benchmark Price Assessments Essential DNA

Adhere to international

norms of trading

Open to industry scrutiny

Chain formation high degree of

circulation

Market acceptance

Lead to the development of a forward market

Clearly defined assessment methodology

High degree of transparency


Benchmark Price Assessments

• Platts benchmarks are used to price term contracts

• Futures settlements are often tied to Platts spot market assessments

• Derivatives “price out” against Platts spot price assessments or futures settlements

The significance

Focus, Impact and Relevance


Q&A


A robust

How data is

analyzed to

produce a final

value

What

is being

assessed

How data is

collected – Platts

Price Discovery

Process must define

Market on Close in depth Methodology


1: What is being assessed


2: How data is collected

• A structured price-discovery system designed to yield a price assessment reflective of market values at the close of the typical trading day.

• Similar information gathering systems are common in the futures markets where energy and financial exchanges publish daily settlement prices reflective of activity at the close of markets.

Platts Market on Close defined

The Market on Close allows transparent and fully verifiable market information to form the basis of the daily price assessment.


Reporters collect trade information all day



With price assessments, not all information can be taken at face value


Bids, offers and transactions in…

Processing information

Heard & Intra-day pages

Transparent,

verifiable price

assessments out.



Transparent:

named bids/offers

Real-time technology for

open price competition

End of day assessment

‘windows/e-window

Assessments reflect

tradable value (or

the traded value) at

market close

Values are based

on Market on Close

(MOC) principles

Assessments based on

firm bids/offers and

traded activity


2: How data is collected Physical & swaps market on close timeline

09.00 – 15.45

Bids and offers

submitted

15.45 – 16.05

No fresh physical

bid/offers accepted

16.15 – 16.20

No more new

derivative/swaps

spreads (time

spreads, quality

spreads, etc.)

16.25 – 16.29:59

Final changes to

physical bid/offers

can be made

09.00 16.00 17.00 15.45 16.30

16.30

Market on Close

All bid/offers expire


2: How data is collected A constant process

Seen Another Way

• Bids, offers and transactions are taken all day and published by Platts

• Cut-off for new bids, offers and transactions

• Platts continues to analyze data


Amongst the most transparent markets in the world

2: How data is collected View of Market on Close


2: How data is collected Market on Close guidelines

General Guidelines: • All bids / offers must be available to the market • Sufficient time to react to the bids and offers • Transactions between affiliates are not used in the assessment process • Open to any credible and credit worthy market participant


2: How data is collected Market on Close guidelines

General Guidelines:

• Data must adhere to Platts’ quality guidelines

• Published indications are ‘firm’ and transactable

• All participants must be contactable at all times during the

assessment process

• Bids and offers via brokers are accepted

• Defined audit trail



31

eWindow in action


Reported bids, offers and trades

($/mt, Rotterdam 3.5%S Barges for prompt ‘Front End’ delivery, February 1 2013)

627

629

631

633

635

637

639

641

643

645

16:0

0

16:0

1

16:0

2

16:0

3

16:0

4

16:0

5

16:0

6

16:0

7

16:0

8

16:0

9

16:1

0

16:1

1

16:1

2

16:1

3

16:1

4

16:1

5

16:1

6

16:1

7

16:1

8

16:1

9

16:2

0

16:2

1

16:2

2

16:2

3

16:2

4

16:2

5

16:2

6

16:2

7

16:2

8

16:2

9

16:3

0

16:3

1

16:3

2

16:3

3

MERCURI

A

ARGOS

VITOL1

VITOL2

WILJO

OW

AGEAN

CARGILL

BP

GUNVOR

CHEMOIL

TRADES

2: How data is collected eWindow in action



33

Market on Close concepts

Incrementability

• Acceptable bids/offers move in incremental small steps

• Price increments are set to the market/environment

• Price changes occur regularly

• Systems in place to handle extreme volatility

Price Gapping

• Discouraged, and typically not used for assessments

• Price makers should bid and offer at reasonable market levels



34

Market on Close concepts

Open to any credible party, not just those already bidding and offering

Bids/offers can be withdrawn at any time, assuming no prior interest has been expressed

‘Keens’ or ‘wants’

Repeatability

An expression of interest to transact at the published bid or offer price

Following the trade a market maker can re-bid or re-offer

Price taker does not have option to add a bid or an offer


$1/mt per 20 seconds

$0.03/b per second

$1/mt per minute

$0.05/b per second

30 seconds 1 minute

None 2 minutes to close

Price discovery is

quicker, so MOC

timings reflect that

eWindow is

an advanced

communication tool

Based on

ICE software

Traders/brokers

represent their own

bids/offers

Platts editors continue to

monitor bid/offer

activities

Information is presented

clearly and updated

immediately

All MOC methodology is

built into the software

Price move/time

Rebids/Reoffers

Final State

eWindow Manual

Platts eWindow and manual MOC environments


A H Meyer & CIE AG

A.P. Moller – Maersk AS

Abengoa Bioenergy

Addax

ADM International Sarl

Aegean Petroleum

AIC Limited

Alcodis SA

Amerex Petroleum

AOT

AOT Trading AG

Apache North Sea Ltd

Apex Oil Company, Inc.

Arcadia

Archer Daniels Midland

Argos

Aspen Oil (Broking) Ltd.

Associated Bunkroil

Astra Oil

Atlantic

Australia and NZ Banking

Mabanaft

Bakri Trading

Banca IMI S.p.A

Banco Santander, S.A.

Barclays Bank plc

BASF Intertrade Ag

BB Energy

Belgische Olie

Maatschappij

Belgomine NV

BGC Radix Energy L.P.,

BioUrja Trading, LLC

Blue Ocean

Associates Ltd

BNP Paribas

BP

Brightoil

Buckeye Energy Partners

Bunge

C Chemicals Pte Ltd

Cargill

Center Oil Company

Cepsa International BV

Chemoil Corporation

Chemoil Energy Limited

Chevron

ChevronPhillips

Chemical Co

Chimbusco Pan Nation

China Aviation Oil

China National

United Oil Corp

Chinaoil

CHS Inc.

CIMA Green, LLC

Citgo Petroleum

Citi

CMT Fund XXVI Ltd

Coastal Oil Singapore

Colonial Oil

Industries, Inc.

Commerzbank AG

ConocoPhillips

Consort Bunkers Pte. Ltd

Copersucar Trading AVV

Cosmo Oil Co. Ltd.

Credit Agricole

Credit Suisse

Crop Energies GmbH

Czarnikow Group Ltd

Daelim Corporation

Daxin Petroleum Pte Ltd

DCP NGL Services, LLC

Deutsche Bank AG

DLH Fuel Company mbh

Dow

DS Mineraloel GmbH

Durfour Petroleum LP

EcoEnergy Inc.

Eminent Energy Limited

Emirates National Oil Co

ENI

Enjet, LLC

ENOI S.p.A.

Enterprise Products Ops

Eon Energy Trading SE

ERG SpA

Essar Oil UK Ltd

Ets Storme & Cie

ExxonMobil

FAL Oil

Flint Hills Resources

Fritz Meyer AG

Galaxy Petroleum

Glencore

Gavilon, LLC

Gazprom M&T

Gazpromneft Trading

George E. Warren Corp.

Ginga

Global Companies LLC

Global Energy Resources

Global Trans Petrochem

GP&Q Inc. dba Center Oil

Gracewood International

Great Island dba Gulf Oil

Greenergy Fuels Ltd

CS Caltex Singapore

GT Commodities

Gulf Oil

Gulfstream Trading Ltd.

Gunvor

Hanwha International

Harvest Energy Ltd.

Hawkeye Gold, LLC

Hess

Hin Leong Trading

Holt Global Ltd

ICAP Energy Pte Limited

Idemitsu Kosan Co.,Ltd

Independent Petroleum

Ineos

Inpex Corp

Interchem

IPC

IPG Ltd

Island Bunker Olis Ltd.

Itochu

J Aron

J.P. Morgan

JB Commodities AG

John W. Stone Oil Dist.

Kanematsu Corp.

Kangqi

Kastratu Group

Kempler & Co.,Inc.

Kernel Oil Pte Ltd

KG Gekol

KLM Royal Dutch Airlines

Koch

Kolmar Americas Inc.

Kuo Oil (S) Pte Ltd.

Lansing Trade Group

Lantmannen Argroetanol

LG International Corp.

Lia Oil SA

Licorne Petroleu,

Litasco SA

Louis Dreyfus

Lukoil

Lyondell Chemie

Macquarie Bank

Mansfield Oil Company

Marathon

Marubeni

Masefield

MatrixBharat

MC Energy, Inc.

Merchant Commodity

Mercuria

Merrill Lynch

Metroplex Energy Inc.

Mieco, Inc.

Mitsubishi

Mitsui

Mocoh SA – Geneva

Morgan Stanley

Motor Oil (Hellas)

Murex Ltd

Musket Corp.

Nakagawa Bussan

Natixis

Neste Oil

Nexen Energy Marketing

NIIC Holding Corp.

NIOC Bunkering B.V.

Nittan Capital

Noble

Nomura International plc

North European Oil Trade

North Sea Group

NuStar Marketing LLC

O.W.

OceanConnect

Oel-Pool AG

Oil Search Limited

Oilchart International BV

Oliehandel Klass de Boer

Omneo Trading AG

OMV Trading Services Ltd

ONEOK HydrocarbonLP

Opet Trade

P.M.I.

Paz Ashdod Refinery Ltd

Pertamina

Petraco Oil Company Ltd.

Petredec Ltd Bermuda

Petro China

Petro Summit Pte. Ltd

Petro-Diamond

Petrobras

Petrocom Energy Group

Petrodom-EKO Domanski

Petrofina SA

Petroleum Traders Corp

Petronas Trading Corp

Petroned BV

PetroSeraya Pte. Ltd

Petro Vietnam Tradin

Phibro

PKN Orlen S.A.

Plains Marketing LP

Preem AB

PTT International Trading

PVM Oil Associates

Raizen Trading LLP

Raystar Corporation

Reliance

Repsol

RILISA, Inc.

Rixo International Trading

Rotterdam Marine Fuels

RWE

S-Oil Corp

S.E.T. Select Energy

SABIC Petrochemical BV

Sahara Energy

Saicat Energy SA

Santos Ltd.

Saras SpA

SARPD Oil Afrique

SEB Merchant Banking

Shell

Sinanen co.Ltd

Singapore Petroleum

Sinochem

Sinnopee

SJB Petroleum Products

SK Energy Europe Ltd

Socar Trading S.A.

Societe Generale

Sprague Energy Corp.

Standard Bank Plc

Standard Chartered Bank

Statoil ASA

Strong Petrochemical

Sucden Geneva SA

Sumitomo Corporation

Sunoco, Inc.

Talmay Trading

Tauber Oil Company

Tenergy Trading SA

The Falzon Group

Total Oil Trading SA

Toyota Tsusho Petroleum

Tradition Financial Services

Trafigura

Trammo Gas International

Transcor Oil Services

Turkish Petroleum

UniCredit Bank AG

Unipec

US Oil

Valero Energy Limited

Van Raak Distributie NV

Vattenfall Energy Trading

Vector Energy AG

Verbeke Bunkering NV

Verbio AG

Vermont Marine Bunkering

VERTICAL North America

Viewsino Oil Pre Ltd.

Vilma Oil SL

Vinmar International

Vitol

Wanxiang Resources

Wells Fargo Commodities

Westport Petroleum, Inc.

Wiljo NV

Winson Oil Trading

Woodside Petroleum

World Fuel Services

Platts Market on Close players More than 280 participants


Vetting for eWindow Market on Close

Participation has many levels

• Business profile

(history, registration, ownership, documents of incorporation etc.)

• Financial standing creditworthiness

(bank references and credit lines, or evidence of ability to issue Letter of Credit

against first class bank in the absence of credit lines)

• Market reputability

• Trade performance history

• Counterparty acceptance

• Adherence to Platts editorial guidelines

• Adherence to operational and logistical market standards

(for best endeavor basis performance)


Just to re-cap

The purpose of a transparent methodology

• Increases confidence in price benchmarks • Encourages responsible behaviour • Simplifies participation in the price discovery process • Establishes high quality information for decision-making


Producing the final assessment

Platts Price Assessment Methodology is built on two fundamental principles: • Price as a function of time • Transparency

The principles


3. Producing the final assessment Time

Importance of Time Sensitive Data

Importance of Time Sensitive Data

• Time stamps allow for true reflection of spreads

• Platts assessments are time sensitive and clearly time-stamped


3. Producing the final assessment value = function of time

A volatile trading day for Brent futures

110.20

110.00

109.80

109.60

109.40

109.20

109.00

108.80

108.60

110.60

110.40

Trades

(Standard)

12/19

(Left) /BRN.ICE[0] – Feb13 Brent Crude Oil Electronic ICE

Price

December 19, 2012 Platts’ Global MOC times

2:00 9:59 11:10 12:32 14:23 15:44 16:31 16:45 17:05 17:29 18:31 19:46 20:28

Singapore &

Dubai Close:

$108.90/barre

l

Houston

Close:

$110.40/barre

l

London

Close:

$109.54/barre

l

Crude futures fall

by 60 cents before

London MOC

Crude futures

rally by 90 cents

after London MOC


Producing the final assessment

Market on Close time stamping


Producing the final assessment Principles and Guidelines

Founding principles:

• Outright prices take precedence over floating prices

• Assessment process accounts for transactions concluded throughout the

Market-on-Close process, plus the backwardation or contango structure

• Deals are subject to several tests including extending the MOC process to test

repeatability


Reported bids, offers and trades

($/mt, Rotterdam 3.5%S Barges for prompt ‘Front End’ delivery, February 1 2013)

627

629

631

633

635

637

639

641

643

645

16:0

0

16:0

1

16:0

2

16:0

3

16:0

4

16:0

5

16:0

6

16:0

7

16:0

8

16:0

9

16:1

0

16:1

1

16:1

2

16:1

3

16:1

4

16:1

5

16:1

6

16:1

7

16:1

8

16:1

9

16:2

0

16:2

1

16:2

2

16:2

3

16:2

4

16:2

5

16:2

6

16:2

7

16:2

8

16:2

9

16:3

0

16:3

1

16:3

2

16:3

3

MERCURIA

ARGOS

VITOL1

VITOL2

WILJO

OW

AGEAN

CARGILL

BP

GUNVOR

CHEMOIL

TRADES

KCEL1

KCEL2

TOTSA

CARGILL

OW

BP

MERCURIA

GUNVOR

LITASCO

Market on Close In action


Assessments are a result of Tested Market Data

Mercuria offered 637.50 OFFER

BP bid 637.00 BID

MARKET ON CLOSE 637.25

Platts typically assesses value between the highest bid and

lowest offer still standing at the close of the MOC process


Q&A

s&p global platts price assessment methodology explained · web based daily pdfs platts on the...

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