Navigating the realm of oil swaps can be complex, with terminology evolving rapidly. To assist, we've crafted a user-friendly glossary to demystify common words and phrases you may encounter.

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83 Terms

Applicable Rate

Term used in billing and tariff schedules. A predefined or agreed-upon standard rate for a given resource or service. The applicable rate is the rate which can or will be applied to that resource or service.

Arbitrage Economics

Buying and selling in different markets to take advantage of price differences.


Argus Media is a global provider of news, prices and analysis for global energy and commodity markets. It offers services, including consultancy and conference events, and its price indexes are often used as benchmarks in physical contracts and the derivatives market. Argus covers a broad range of commodities, including crude oil, coal, natural gas, emissions, bioenergy, fertiliser, petrochemicals, metals and transportation.

Assessment Window

The assessment window is a specific period during which market participants can submit bids, offers and trades for a particular product at a specific location. These data are combined with other sources to arrive at the prevailing market price for that product at that location. The assessment window typically lasts from thirty minutes to a full trading day and is a crucial component of the price discovery process.

Associated Gas

Natural gas produced with crude oil from the same reservoir.


Having an ‘axe’ is having a directional bias when trading. You may be willing to trade both sides of the market but will have a particular interest on one side of a given contract and will therefore be able to be more competitive on price when quoting this side. Brokers may ask you which way you are ‘axed’ to gauge interest in the markets they have to show you so as not to waste your time.


Backwardation is a situation in the futures markets where the future spot price is expected to be higher than the current futures price, i.e., futures prices are lower than the expected spot price at contract maturity. This typically occurs when the underlying commodity has a cost of carry or when market participants expect the spot price to rise. Backwardation can signal an expectation of a shortage or higher demand for the commodity in the future.


Balmo is the short form of ‘balance of the month’ contract. The balmo is the pricing month contract that is settled every working day. For a September contract in swaps, this contract will become balmo once we are in September. The balmo will refer to the exposure that hasn’t yet been priced. For example, if it is 4 September, the balmo contract will expose the trader to 4–30 September and not include the first three days’ settlement prices.


A unit of measurement most commonly used for crude oil. A barrel of crude is equal to approximately 42 US gallons or 159 litres (Note: The actual measurement depends on the fluid being measured).

Base Gas

Gas required in a storage pool to maintain sufficient pressure to keep the working gas recoverable.

Basis Risk

Basis risk refers to the variance in the final physical price that settles a physical oil deal and the final derivative price on the contract(s) that were used to hedge. This risk can be mitigated, but no hedge is perfect.


The Department for Business, Energy and Industrial Strategy.

BFOETM (Brent, Forties, Oseberg, Ekofisk, Troll and WTI Midland)

BFOETM is a basket of physical crude grades used to set the price for Dated Brent contracts. The following are the crude grades included in the basket: Brent, Forties, Oseberg, Ekofisk, Troll and WTI Midland


A bid is a market order to buy. Traders will also refer to the market as ‘bid’ if there are more buyers than available sellers at a given time. ‘Well bid’ is also a term used.

Bid Above

Bid above is a market maker’s term used when a bid is above perceived fair value according to the trader’s own assessment.


A measure of market liquidity, also known as bid/offer. The bid is the price level at which buyers are willing to buy and the ask is the price level at which sellers are willing to sell. The thinner the spread the higher the liquidity.

Bill of Lading

A bill of lading is a legal document issued by a carrier to a shipper detailing the type, quantity and destination of goods being shipped. Serving as a shipment receipt, it also establishes an agreement for the transportation of the goods. In international trade, the bill of lading is often required for customs clearance and can act as an ownership title, which can be traded, sold or bought while goods are in transit.


A process for recovering metals from low-grade ores by dissolving them in solution, the dissolution being aided by bacterial action.

Block Future

Block Future is a term used by exchanges to define oil swaps. Oil swaps used to be traded bilaterally until they were listed on the exchanges, and as exchange-cleared products, they strictly need to be defined as futures. The exchange differentiates between exchange-traded futures by calling these Block Futures.

Bollinger Bands

A system based on the premise that prices revert to their mean. The standard deviation of the moves away from the mean are used to form two bands around the price. Whenever the price breaks below or above the band, it is deemed too extreme a move and therefore liable to correct back from the standard deviation towards the mean of the price.

Borderline Customer

An energy customer who receives service from a provider in one territory and is billed by a provider in another territory.


A sudden breakout of prices from a chart pattern that has been forming for some time. It marks the end of a period of uncertainty. The breakout point can often be used to guess how far prices will go in that direction.


Believing that a price is going to rise.

CFTC (Commodities Futures Trading Commission)

The CFTC is an independent US government agency that regulates futures and options markets. It was established in 1974 to promote competitive, efficient and transparent markets while protecting market participants from fraud, manipulation and abusive practices.


An Exchange-associated body charged with the function of ensuring the financial integrity of each trade. Orders are ‘cleared’ by means of the clearinghouse act as the buyer to all sellers and the seller to all buyers.

CME (Chicago Mercantile Exchange)

The CME is one of the largest futures and options exchanges in the world, offering derivatives contracts for a wide range of assets, including commodities, currencies, equities and interest rates.

Commercial Field

An oil and/or gas field judged to be capable of producing enough net income, at sufficiently low risk, to make it economic for development.

Commodity Index Fund

An investment fund that enters into futures or commodity swap positions for the purpose of replicating the return of an index of commodity prices or commodity futures prices.


Contango is a situation in futures markets where the future spot price is below the current futures price, i.e. futures prices are higher than the expected spot price at maturity. This typically occurs in markets where there are costs associated with storing the commodity until delivery, such as with oil or natural gas. Contango can signal an expectation of surplus supply or lower demand in the future.

COT (Commitment of Traders; CFTC)

The COT is a weekly report provided by the CFTC that aggregates the positions of large traders in the US futures market. The report is used by traders and analysts to understand the behaviours and sentiments of major market participants, offering insights into potential price movements in various asset classes.

COT (Commitment of Traders; Onyx)

The Onyx COT is a daily report provided by Onyx Capital Group that aggregates the positions of traders in the global oil swaps market. The report is used by traders and analysts to understand the behaviours and sentiments of major market participants, offering insights into potential price movements in various oil swap contracts.


A crack is a shortened word for the value of a refined oil product against the underlying crude price. It is a reference to the refining cracking process to convert crude into a refined product. The better the crack price, the more a refiner will look to maximise the yield on that product. To calculate the crack, a given refined product price is converted from metric tonnes or gallons to a barrel equivalent price to provide an accurate reference against crude prices. Product cracks are used to assess the refinery margin, a crucial indicator for refiner demand. They are a useful gauge of product-specific health, as the correlation with outright crude prices is removed.

CTA (Commodity Trading Advisor)

A CTA (commodity trading advisor) is a US financial regulatory term for an individual or organisation who is retained by a fund or individual client to provide advice and services related to trading in futures contracts, commodity options and/or swaps.

Dated to Lead

The value of a DFL contract vs the associated Brent spreads. Given the 10–30 day loading methodology that Platts uses to settle Dated Brent swaps, M1 Dated to lead will be assessed as the DFL vs the next month forward Brent spread. For example, January Dated to lead is equal to January DFL – February vs March Brent spread. As Brent futures can be converted to BFOETM physical to align the Dated Brent swap prices via the STASCO BFOETM 2022 GTCs at Brent futures expiry, the value of this switch can be valued by assessing the difference in value between the two. Dated to lead is therefore used as an indicator to assess the cost of keeping physical barrels from the Brent Index or Brent futures expiry.

Differentials (Diffs)

A differential refers to any contract priced against another, with appropriate volume conversions, so the value of the diff is decorrelated from the outright prices of oil. Differentials are not cracks, which are also differentials but specific to a product value against the underlying crude price. Differentials are useful for oil traders to interpret variations, such as the same product in different geographical locations, different specifications within a core product or a link from crude futures to more physically related contracts.

East/West (MD)

An East/West differential is the difference between the price of a product in the East (Asia, usually Singapore) vs its price in the West (Europe, NWE usually). An example of an E/W would be the gasoline E/W which is Sing 92 - EBOB. An East/West can be useful for exploiting price discrepancies between the East and West and also the effects of freight and geopolitical risk premiums which may affect one region more than another.

Exchange-Traded Future

Exchange-traded future is a term used to distinguish Block Futures (oil swaps) and the core benchmark futures Brent, WTI, RBOB, Gasoil and Heating Oil.


A market flow is a way of labelling a group of transactions that has entered the market from a consistent source. The ‘flow’ might be a producer hedging their production for Q4 next year with a fixed amount of volume to sell of a given crude contract. All the transactions that comprise the producer’s hedge would be considered part of the producer’s flow. It could also be speculative positioning one way until a trader maximises their risk tolerance. Market makers will take on a flow that needs to be executed and derisk this core flow against the flow of other contracts.

Forward curve

A graph of what a commodity is currently worth based on a possible buy or sell in the future. A forward curve is built using the current day’s price values to exchange oil in the future, and its value will change over time. A forward curve is not a price forecast like the formal weekly, monthly or annual predictions that analysts produce based on fundamentals data. It is an indicator based on the bids and offers in the market for that day.


The GasNap is the difference in price between gasoline and naphtha in a region. It is used to interpret the value of placing naphtha as a blending component into the delivered gasoline price. An increase in the price incentivises blenders to use more.


The water found underground in the cracks and spaces in soil, sand, and rock. It is stored in and moves slowly through geologic formations of soil, sand and rocks called aquifers.

Heavy Crude Oil

Oil with gravity below 28 degrees API.


Hitting is the colloquial term used when selling a bid in the market, whether a derivative or physical transaction.


HOGOs (heating oil/Gasoil) are the difference between the US heating oil futures (or swaps) and the ICE Gasoil futures (or swaps). It is an arbitrage differential for middle distillates and if the HOGO diff is very low this may encourage buying of heating oil by European players.

ICE (Intercontinental Exchange)

The ICE is an American company that operates global exchanges and clearing houses and provides data and listing services, including owning the New York Stock Exchange. Founded in 2000, ICE manages regulated exchanges, marketplaces and clearing houses across multiple countries, facilitating financial transactions and trade.

ICIS (Independent Commodity Intelligence Services)

ICIS is a global source of independent commodity intelligence services. It provides data on over 180 commodities across the global petrochemical, energy and fertiliser markets and is known for its benchmark price assessments, in-depth market coverage and extensive data analytics.

IOCs (Integrated Oil Companies)

IOCs are large private corporations based in developed countries involved in all aspects of the oil and gas industry, including exploration, extraction, refining, distribution and marketing. They operate across national boundaries, often have their own production capabilities and hold significant influence in global oil and gas markets. Examples include ExxonMobil, Royal Dutch Shell and BP.


Industry Technology Facilitator; an internationally recognised champion for technology innovation within the oil and gas industry acting as a conduit between technology innovators and the industry.


Lifting is the colloquial term used when paying an offer in the market, whether a derivative or physical transaction.


A market’s liquidity is assessed by how straightforward it is for a trader to make a transaction. Ideally, a trader will want to be able to freely buy or sell contracts in the volume they need and will expect the transaction price to be as close as possible to fair value and for the full volume traded. Liquidity is therefore talked about by the volume available to trade at a given moment (depth) and the tightness of the bid/offer.

Middle Distillates

Medium-density refined petroleum products, including kerosene, stove oil, jet fuel and light fuel oil.

Minute Markers

Minute markers are similar to TAS but for various times in the day and are calculated over one minute rather than two. Minute markers are provided at important times in the market, usually aligning with roll-off periods in PRA assessment windows or the Brent Index. For example, there is a minute marker at 16.30 Singapore time for Eastern contracts and at 16.30 London time for European-based contracts.


Million barrels of oil equivalent.


The simple difference between the price now and the price N days ago. Momentum is negative if the price now is below the price N days ago, and positive if it is above.

Octane (MD)

Octane is a measure of a fuel's ability to resist knocking during combustion. In commodities trading, octane levels determine the quality and pricing of gasoline, influencing trading decisions and market value.


The market is said to be ‘offered’ when there are more sellers than buyers at a given time. ‘Well offered’ is also used.

Offered Through

Offered through is a market maker’s term for when an offer is below perceived fair value according to the trader’s assessment.

Oil Future

An oil futures contract is a financial agreement that obligates the buyer to purchase and the seller to deliver a certain quantity of oil at a predetermined price on a specified future date. However, while some contracts involve the physical delivery of oil upon expiration, others are cash-settled, where the difference between the contract price and the market price at expiration is exchanged instead of the actual commodity.

Oil Inventory

Oil inventory refers to the stored reserves of crude oil and refined petroleum products at any given time. These inventories can be held by oil producers, refiners, governments and other entities involved in the oil supply chain. Monitoring changes in oil inventories, such as the weekly data reported by the US Energy Information Administration, is crucial for market participants, as it provides insight into supply and demand dynamics and can influence oil prices.

Oil Sands

A deposit of sand saturated with bitumen.

Oil Swap

An oil swaps contract is a financial agreement that obligates the contracted parties to exchange the cash difference between the contract price and the market price of oil at contract expiration. Oil swaps differ from oil futures in oil derivatives in that contracts are all cash settled, and the index is settled and published daily to a PRA assessment. Oil swaps are mostly voice-brokered rather than traded directly on the exchange, which is another difference from an oil future. Oil swaps are also sometimes called Block Futures.

Open Interest

The number of contracts that have not yet been closed out and are considered ‘open’. The significance of an open contract is that it will either be held to expiry or closed out at some point. The closing of a position will lead to incoming flow that could have a material impact on the market’s direction, especially if open interest is high.


This term classically refers to bilateral trading between counterparts. Counterparts extend each other credit, making an assessment of the counterpart’s default risk internally. This type of trading can be facilitated in theory by any trader; however, it is commonly an investment bank that provides this facility to give traders access to the market. Confusingly, you will also hear the term ‘OTC market’ to define the oil swaps market, as the trading is still mostly voice-executed via brokers who then pair two traders together. Historically the swap market was only accessible by trading bilaterally, and the terminology has stuck.

Physical Differential (or Premium)

The number at which physical transactions are taking place for a given crude oil or oil product relative to a benchmark. Physical trades are negotiated and dealt using a benchmark derivative contract as a reference price. The value of the physical differential is added to the derivative price to determine the full physical transaction value. It is done this way as outright prices of derivative contracts are highly volatile, and  90% or more of the price is correlated with outright prices anyway, making the differential key in assessing material differences in the specification, product type or location.


Platts is a provider of energy and commodities information and a source of benchmark price assessments in the physical energy markets. Owned by S&P Global, Platts covers a wide range of sectors, including oil, natural gas, metals, agriculture and petrochemicals. Its price assessments are widely used as benchmarks in the global energy sector.

PRA (Price Reporting Agency)

A PRA is a company that collects, assesses and publishes information regarding commodity prices. PRAs provide price transparency in markets by reporting on transactions, bids and offers, thus enabling buyers and sellers to make informed trading, pricing and risk management decisions. Key commodities covered by PRAs include energy products, metals and agricultural goods.

Priced In

This is when a given driver of markets is considered already represented in the current price. It occurs when all those capable and willing to react to a given market event or headline have already done so, and therefore you can no longer expect more news of the same situation to lead to more of the same flows.

Primary Recovery

The production of oil and gas from reservoirs using the natural energy available in the reservoirs and pumping techniques.


RVP (Reid vapour pressure) measures the volatility of petroleum products like gasoline. RVP is used to ensure compliance with environmental regulations and seasonal fuel requirements. It is especially important in gasoline, which must have a lower RVP in the winter and therefore impacts the composition of the blending pool.

Scaling In

Scaling in refers to a trader adding more risk to an already open position.

Sharpe Ratio

The Sharpe ratio is calculated by subtracting the risk-free rate of return from the expected return of the investment and dividing the result by the standard deviation of the investment returns. The higher the Sharpe ratio, the better the risk-adjusted performance of the investment.


Slippage refers to the difference between fair value at the time of a trade and the final price received once the trader has executed all the desired volume. Slippage is more likely with larger volumes or when trading in the same direction as the rest of the market.

Sortino Ratio

The Sortino ratio is calculated by subtracting the minimum acceptable return from the expected return of the investment and dividing the result by the downside deviation of the investment returns. The higher the Sortino ratio, the better the risk-adjusted performance of the investment in terms of avoiding downside risk.

Stopping Out

Stopping out refers to the closing of a trader’s position that is out of the money. Stopping out will occur when the trader has reached their maximum risk tolerance on the trade, either from a pre-set level or direction from management. Stopping out usually causes a spike in volatility, reflecting the urgency of traders exiting a position.

TAS (Trade at Settlement)

TAS is a contract that becomes a live exchange-traded future but only at the point at which the exchange-traded future settles and at that settlement price determined by the exchange. This allows a trader to execute a trade at the settlement price of a futures contract rather than at the current market price.


In oil swaps, tenor is used to reflect the pricing period of the contract. In oil futures, the term is used to indicate the loading period of the oil and can settle up to two months ahead of time.

Time Spreads

A time spread, or ‘calendar spread’, in oil derivatives, is a strategy where a trader simultaneously buys and sells two futures or options contracts for the same oil quantity but with different expiration dates. This strategy aims to profit from the change in the price difference, or spread, between these two contracts over time.

Trade House

A trade house, or trading house, refers to a business that specialises in the international trade in commodities. They engage in various activities, such as procurement, distribution, arbitrage and risk management. Trade houses can deal in a range of commodities, including oil, gas, metals, grains and more. They often have a global presence, with operations in various countries, and play a critical role in the supply chain, bridging gaps between producers and end-users. Examples include Glencore, Trafigura and Vitol.

Unbundled Rates

Rates charged for the specific services that make up energy provision.


Option risk parameter that measures the sensitivity of the option price to changes in the price volatility of the underlying instrument.


The VISCO contract in fuel oil trading is the Singapore 180cst - 380cst fuel oils. It is so called as the difference between the two products is the viscosity, with 380cst the higher viscosity fuel.


Volatility refers to by how much and over what period the prices of a given contract move. How volatile a market is will be defined relative to the historical movement of that contract.


Weighted average cost of gas.