[hodder]

I buy ~200,000 physical barrels of oil for 2 refineries every single day. The quantity is mind blowing and Im not even a particularly large oil trader in the grand scheme of things. The world drinks ~104 million barrels per day or around 1200 barrels a second. An olympic swimming pool holds ~15000 barrels of volume. In Canada, we trade in "cubes" which are M3. Each M3 is ~6.29287 barrels of oil. I do my monthly planning in km3.

I'm happy to answer any industry questions in case anyone has any. It is a fascinating job.

[x187463]

I find it nearly incomprehensible that so much oil exists. That's ~7k Olympic swimming pools of oil every day. This has been going on for decades.

[hodder]

It still blows my mind to this day. Every time I "purchase" a ship full of crude it blows my mind the level of infrastructure to make it happen. Maybe I'll load an Aframax full of 500kbbl or issue my crude buy plan in km3. I always try and look up the ships and track the vessel movements and sea conditions bc there are teams of people on those ships working them. Meanwhile I just picked up the phone and made it happen... with like $40m bucks. It is a wild thing that never becomes normal.

Just think about a what a km3 of oil would look like. It is nuts. then realize that we buy and sell in 10,000m3 pipe batches with plenty of liquidity.

[OptionOfT]

Do you actually buy them on the spot market or buy them as futures?

[hodder]

The street parlance in commodity trading tends to be more about where you are trading on the (time) curve on what is called “spot”. Ie. if you are buying near delivery (prompt month or inline) that’s often referred to as spot.

But I’m trading physical forward contracts technically and it depends on the specific grade how far forward that is.

The physical oil market trades in monthly cycles. On May 1 I’ll be trading forward contracts for physical oil to inject in June (which will transit for about month and land in July). For a liquid grade like WCS (Canadian heavy) I could technically buy phys “injectors” down the curve a good ways. Monthly, quarterly out about year.

Once a barrel is injected, schedulers manage swaps around physical ops with counterparties to ensure our tanks don’t overflow and we have a nice rateable supply. If a swap won’t cut it at that point, and I’m physically short to refinery demand or longer than I can hold, I can buy or sell distressed inline barrels (already in transit) with lower liquidity.

These aren’t futures though. Futures are standard volumes and typically settled financially. WTI futures for instance are typically not held to delivery, though you can deliver it into Cush if you have tankage. The paper market vastly, vastly exceeds the physical real barrels flowing though, so most of these are simply closed out bets/hedges.

[treyd]

How do you take delivery of such huge volumes? Rail?

[cman1444]

Surely by pipeline or ship I think. When he says "physical barrels of oil" I believe he means he's actually buying the oil itself (as opposed to buying a contract or derivative of some sort). I don't think he means that the crude oil is actually arriving in individual barrels. But I could be wrong.

[hodder]

Correct.

[hodder]

Pipeline and ship. We've done some rail in the past, but it is a last resort when basis spreads are wide.

The oil is pumped off of ships or straight off the pipeline into our refinery tankage.

[cj]

Do refineries employ people like you directly? Or do you work for a downstream supplier of some kind? Curious what the supply chain looks like.

[hodder]

Yeah I work for a large oil company. Companies like BP, Shell, Marathon, Valero etc all have oil traders/marketers doing refinery supply. There are also intermediaries like traders at midstream companies, producers (selling the oil), or trading shops like Trafigura, Glencore, Mercuria who are slowly accruing more physical assets. Some hedge funds operate in the phys space as well.

[shalmanese]

is a km3 1000 m3 or 1,000,000,000 m3?

[OptionOfT]

to go from km to m you multiply by 1,000.

to go from km^2 to m^2 you multiply by 1,000^2.

to go from km^3 to m^3 you multiply by 1,000^3.

So 1km^3 is 1,000,000,000m^3