ENERGY COMMODITY TRADING: Price Volatility Management

Commodity Risk Management is emerging as a critical differentiator of business performance. 

The new norm in the oil and gas terrain is a regime of significant commodity price volatility, affecting many businesses across different industry sectors and across the entire energy chain.

The oil industry, with its history of booms and busts, has been in its deepest downturn since the past few years. Earnings are down for companies that made record profits in the past. The cause is the plunging price of a barrel of oil.

In Nigeria, prices of petroleum products keep surging. There has been a recent announcement of increase in the prices of DPK and AGO, and a soon-to-be-seen corresponding increase in price of PMS.

The big question is, how will stakeholders hedge against this extreme volatility?

Well, ask no further...

Eastern Union Energy has established Commodity Trading and Risk Management (CTRM) functions which are delivering significant performance and control improvements. We are setting clear CTRM standards.

Management of the price volatility of the commodity and the optimisation of Supply + Demand are keys to our overall performance.

We are using established centralised commodity trading operations, optimising the value of the physical flow of the commodity, trading around the physical flows to add further value, using financial derivatives to manage exposures and in some instances, holding proprietary trading positions.

We have become more vertically-integrated, typically applying ‘active trading’ strategies, managing the underlying risks - within defined limits using tight control standards.

Differentiation happens through differences in ‘risk appetites’, making us active market hedgers - structuring more simplified risk and commercial strategies.

 

Eastern Union can help

Our CTRM functions can bring insights and good practices to your CTRM challenges:

  • Risk appetite
  • Trading strategy
  • Supply chain optimisation
  • Contract structuring

Our team have access to the extensive breadth of additional EUE services where these may be required, and our insights are often valuable to our Clients.

 

~Eastern Union Energy