Wednesday, October 7, 2009

Glossary of terms used in the trading of oil and gas, utilities and mining commodities.
Trading of oil and gas, utilities and mining commodities has moved from being a contract-focused specialist activity to occupy a more centre stage role in the strategies of companies in these sectors. Energy market liberalisation, carbon markets, increased participation from investment banks and hedge funds, and greater interplay between physical, future, over the counter and exchange traders markets, have all added to the scope and complexity of commodities trading and risk management. This growth and dynamism brings with it a growing and changing language. Cross-commodity trading is also a new reality—from oil, gas, LNG, CO2 allowances, to coal, basic and precious metals and uranium—requiring familiarity with trading terminology among a wider range of professionals. Our glossary provides a comprehensive guide to the many expressions used. Like any guide to language it is, at times, intriguing and fascinating. An outsider coming across terms such as 'butterfly spread' and 'contango' might be forgiven for mistaking the world of energy trading for a summer meadow or an exotic dance. On the other hand, terms such as 'crack spread', 'slamming' and 'brown out' are likely to bring them firmly back down to earth.