The ability to control large amounts of an underlying asset for a small initial investment.  Futures and options are leveraged products because the initial premium paid is usually much smaller than the nominal amount of the underlying asset.

Letter of Credit
Instrument or document issued by a bank guaranteeing the payment of a customer's drafts up to a stated amount for a specified period. It substitutes the seller's exposure to their counter party with exposure to the bank thus reducing the seller's credit risk.

London Interbank Offer Rate. The rate offered by banks on Eurocurrency deposits (ie the rate at which a bank is willing to lend to other banks).

Light Crude Oil
Crude oil with low density.

Light Ends
Volatile hydrocarbon products such as propane, butane, gasoline and naphtha.

Limit Move
The maximum price move permitted by an exchange in a single trading session.

Limit Order
An order placed by an investor to be executed at a pre-specified price or better.

Linear Programming
Technique for finding the maximum value of some equation subject to stated linear constraints. Oil refineries use linear programmes to calculate the optimal production setup.

Lognormal Distribution
A variable has a lognormal distribution when the logarithm of the variable has a normal distribution.

Long Position
A position involving the purchase of an asset.

London Metals Exchange, London

Liquefied Natural Gas (LNG)
Natural Gas (mainly Methane) which has been liquefied for ease of storage and transportation. The gas is liquefied either by reducing the temperature or by increasing pressure.

Liquefied Petroleum Gas (LPG)
A light hydrocarbon composed mainly of propane and butane, occurring naturally in crude or in refining process. Gaseous at atmospheric pressure and temperature, liquefied for ease of transportation and storage by increasing pressure.

Liquidity Risk
Risk of unexpected cash shortages leading to the need to arrange funding at short notice and on terms that are potentially unfavourable. Not to be confused with market liquidity risk.

Line Losses
The difference between the quantity of electricity generated and the quantity delivered at some point in the electric system. Losses vary depending upon temperature, voltage levels, and load levels.

The amount of power carried by a utility system or subsystem, or the amount of power consumed by an electric device at a specified time. Load is also referred to as demand

Load Factor
The ratio between average and peak usage for electricity or gas customers. The higher the load factor, the smaller the difference between peak and average demand.

Load Shape
A combination of electricity contracts covering a period of weeks or months, which reflects the profile of the daily power requirements of a customer.

Members of a futures exchange who trade solely on their own account.

London Clearing House (LCH)
Clearing house which registers, guarantees and clears all trades on a number of London based exchanges including the IPE (International Petroleum Exchange), LIFFE (London International Financial Futures and Options Exchange), LME (London Metal Exchange).

Louisiana Offshore Oil Port (LOOP)
A US deepwater port which can accommodate oil supertankers known as ULCC's (Ultra Large Crude Carriers).

The unit size for transactions on a futures exchange.

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