Navigating Uncertainty in Energy Markets

Posted by Mary DeFilippe



The energy market has never been more diverse. Waves, wind, and sun have been harnessed for power and we can access previously unavailable sources of oil, gas, and coal. Worldwide demand for energy rose by about one-third between 2000 and 2014 and will continue to grow in part due to urbanizing populations and the expansion of the middle class in China and other developing economies. Energy companies need to meet this demand as profitably as possible, even as markets continue to shift and change.

Demand is growing, but what about profits?

Global demand for energy is expected to grow by 25 percent between 2014 and 2040. Approximately 80 percent will be met by oil, natural gas and coal – reliable, proven, affordable, and available in the amounts needed to provide for 7 billion people 24 hours a day.

Demand is growing, but achieving profitability in energy markets is increasingly difficult. Traditional trading strategies based on historical market development no longer apply. Operating profitably and limiting down-side exposures requires new strategies informed by a deep understanding of near real-time market conditions, constant monitoring of existing and emerging risks, and advanced analytics to test and analyze those strategies.

Technology and data to help

Energy trading and risk management (ETRM) solutions cover all aspects of a transaction lifecycle including trading, risk management, processing, scheduling, logistics, and accounting. These systems play a critical role in helping companies capture and measure risks, but they do not provide the advanced analytics and insights required to maximize profits in today's tumultuous markets. Only commodity-specific analytics solutions like Eka's Commodity Analytics Cloud can analyze the volume, velocity, and variety of data required to make the best decisions about constantly shifting energy markets. This is an industry operating in multiple dimensions, responding to hundreds of stimuli, and managing thousands of unique risks – any one of which could trigger a spiraling chain of events with damaging financial, environmental, and reputational consequences.

Commodity Analytics Cloud extracts data from disparate sources throughout the value chain – internal systems such as ETRM, CTRM, ERP, CRM, spreadsheets, smart machinery, and IoT sensors, plus external sources such as market curves and weather data. The program analyzes data using advanced algorithms, artificial intelligence, and machine learning in Eka's intelligence engine to deliver unprecedented business insight to energy companies, improving efficiency, decreasing costs, and saving time. Commodity Analytics Cloud enables energy companies to reduce risks and preserve value in today's volatile market environment.

Uncertainty continues

On assuming office, President Trump immediately cancelled the Trans-Pacific Partnership between the U.S. and key countries in Asia-Pacific, including Australia, Canada, Japan, Malaysia, Mexico, and Singapore – and in doing so already started to re-shape the energy trading landscape. From macro- to micro-level, the details that must be checked, analyzed, understood and acted upon are vast. Any one of these, and a hundred other factors, can have a dramatic impact on margins and eventual profitability. What is clear is that in this highly correlated, interconnected and complex industry, specialist tools that can handle the specificities of international energy trading are essential. Adopting an energy analytics solutions is a must.

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ETRMcommodity tradingenergy trading and risk management

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