Download See how Argus marks liquid and illiquid forward curves

Argus US Refined Products Forward Curves
Overview of liquid and illiquid curve validation
Argus US Refined Products Forward Curves are a powerful,
independent market valuation tool used to support
investment and trading decisions. Argus’ forward curve
assessments reflect real commodity market activity, free
from distortion and representative of fair market values.
The Argus curves data allows for better management of risk
exposure to refined product price volatility. In addition, this
service provides independent data for use in calculating
value-at-risk and mark-to-market accounting.
Argus’ forward curves are derived from our
deep-well of data including:
Liquid Curve Example
Gulf Coast Ultra Low Sulfur Diesel (ULSD)
liquid curve includes financial swaps trading on Gulf Coast
A
ULSD for 12-18 months, thereby, typically providing market
data for much of this price curve.
Methodology when market data is available
• Use executed transactions and products spreads within the
bid/offer spread at 2:30 pm EST.
• If no executed transactions occurred, use the mid-point of
the bid/offer spread as of 2:30 pm EST.
• Use product spreads and/or time spreads when
available.
• The rich array of physical transactions that are
reported to Argus everyday
• Argus’ proprietary cash market indices and
assessments
• Use various statistical models such as regression formulas
or historical pricing relationships to reference markets.
• Swaps market data reported by market participants
• Previous trading days’ swap curve value
• Futures settlement prices
• Reference markets are established by identifying the
reference market as having a strong correlation to the
primary market.
Argus US Refined Products Forward Curves are produced on
a daily basis, with no missing data or gaps. Argus employs
a variety of mathematical and statistical analyses to assess
each curve’s fair market value. The specific analysis and
computation varies depending on the market data that is
available on a given trading day.
Analysis and computation when market data is not available
GULF COAST ULSD FORWARD CURVE
Swap Gulf Coast ULSD $/gallon
3.1000
3.0000
2.9000
2.8000
2.7000
2.6000
2.5000
2.4000
Oct-17
Dec-17
Aug-17
Apr-17
Jun-17
Feb-17
Oct-16
Dec-16
Aug-16
Apr-16
Jun-16
Feb-16
Oct-15
Dec-15
Aug-15
Apr-15
Jun-15
Feb-15
Oct-14
Dec-14
Jun-14
Aug-14
2.3000
Apr-14**
While market data may vary, Argus employs proprietary
modeling designed to access a curves value. In an attempt
to demonstrate Argus’ methodology in practice, the
adjacent section provides a closer look at how Argus
produces curves in a liquid versus illiquid market.
Swap Gulf Coast ULSD $/gallon
Petroleum
illuminating the markets
Market Reporting
Consulting
Events
Argus US Refined Products Forward Curves
Key Features
Illiquid Curve Example
New York Harbor Heating Oil
n illiquid curve does not trade on a forward curve basis. This
A
type of curve will typically trade only as a physical cash
product, characterized by a lack a swaps contract, or trade
largely on a prompt physical basis.
Analysis and computation when market data is not available
• Use a regression formula or other relationship between
NYH Heating Oil and its reference market.
• Make sure that the approach chosen on a given day does
not cause the NYH Heating Oil curve to experience a price
change that is not commensurate with the futures markets,
reference markets and other refined products curves.
• If the statistical approach employed is not yielding a curve
value that is fair and reasonable, use the prior day’s
differential to futures curve with the current day’s futures
curve to derive a fair market curve value for a given day.
NEW YORK HARBOR HEATING OIL FORWARD CURVE
Physical NY Harbor Heating Oil $/gallon
3.00
2.90
2.80
2.70
2.60
2.50
2.40
2.30
• Daily assessments for 31 US Refined Products markets
• Data includes balance of the month prices, prompt year
and three-years forward
• Time-stamped at 2:30 p.m. EST, in alignment with the daily
NYMEX settlement
• Basis differentials to CME Nymex ULSD (HO) and RBOB
(RB) futures contracts
• Independent and transparent market-appropriate
methodology
• Delivery options include: Email, FTP data feed and third
party delivery partners
Applications
• Forward curve validation
• Mark-to-market accounting
• Value-at-risk
• Deal valuation
• Potential future exposure
• Scenario analyses
• Valuing option premiums
Physical NY Harbor Heating Oil $/gallon
Oct-17
Dec-17
Aug-17
Apr-17
Jun-17
Feb-17
Oct-16
Dec-16
Aug-16
Apr-16
Jun-16
Feb-16
Oct-15
Dec-15
Aug-15
Apr-15
Jun-15
Feb-15
Oct-14
Dec-14
Jun-14
Aug-14
Who is Argus?
Apr-14**
Argus is a leading provider of data on prices and
fundamentals, news, analysis, consultancy services and
conferences for the global crude, oil products, LPG, natural
gas, electricity, coal, emissions, bioenergy, fertilizer,
petrochemical, metals and transportation industries.
Data provided by Argus is widely used for indexation of
physical trades. Companies, governments and international
agencies use Argus information for analysis and planning
purposes.
Argus Media
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Tel: +1 713 968 0000 | Web: www.argusmedia.com
Email: [email protected]
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