The gas in our cars, cleaning chemicals in our cabinets, and reusable cups from which we drink our coffee or tea all have ties to the crude oil industry. As feedstock for a wide array of goods, crude oil and crude products are among the most widely traded commodities in the world. The market attracts diverse participants; however, many of the challenges faced are universal.
CommodityPoint’s latest white paper, “Global Oil Markets- Increasing Uncertainty and Risk,” highlights several of these challenges and concludes that now is the time to invest in an advanced energy trading and risk management (ETRM) software solution to combat rising volatility.
This white paper discusses how the political unrest affecting many of the world’s crude-producing regions is having a direct effect on oil supply. Tensions in the Middle East threaten to shut down the busiest port in the region, which could interrupt the delivery of 17MMbbl/day. Should this situation come to fruition, market volatility will be further exacerbated, and those companies that are not properly equipped to manage it will suffer.
While the threat of a continued reduction in crude supply looms, crude demand continues to grow each year. CommodityPoint’s paper suggests the only way to effectively navigate the market fluctuations caused by scenarios such as this is to implement a sophisticated trading solution that can not only capture, manage, and value trades and hedge positions; but that can also model the entirety of the physical operations of market positions. Read the paper now and find out why it’s imperative to have an ETRM solution such as Commodity XL™ that provides an integrated, real-time view of physical and financial exposure alongside operational, credit and regulatory risk exposure.
In just a few years, mobile technology has reshaped the landscape for businesses everywhere. The growing presence of smartphones and tablet devices in the workplace has forced companies to take a sharper look at the benefits mobile applications offer.
Previously, it was impossible for certain jobs to be performed away from a workstation. The mobile revolution has changed those rules. With the arrival of powerful mobile devices and sophisticated mobile applications, it is now possible for employees to perform tasks, previously restricted to their desktops, from any location at any time. And therein lies the value that mobile technology can offer: the ability to untether employees from their workspaces while increasing productivity. For this reason alone, companies are exploring ways to adopt new mobile solutions into their infrastructure in order to maintain an edge over the competition.
Software vendors across all industries are looking for ways to establish themselves in the mobile frontier. The challenge facing these vendors is to find a way to deliver solutions that make sense in a mobile world. The first temptation is to simply repackage existing desktop software and offer it on mobile platforms. This tactic fails, however, to recognize that a mobile solution cannot comfortably accommodate the same movements and actions that might be found in standard computer software. Vendors must accept that the answer lies in preserving functionality while promoting simplicity.
This fundamental concept has helped distinguish the visionaries in mobile technology from the rest of the competition. As software industries saturated with players hum with promises of new mobile initiatives, only a handful of companies actually deliver on such promises. This is especially true of the Commodity Management world. For almost two decades, Triple Point Technology has outpaced its competitors in this industry by producing unmatched Energy and Commodity Trading and Risk Management (CTRM) solutions. When it comes to mobility, Triple Point is the only Commodity Management company today that has managed to bring mobile CTRM products to market. In just under a year, Triple Point has already managed to produce four distinct mobile applications capable of transforming the way companies manage commodities by empowering staff to perform key operations anytime, anywhere.
To read more about Triple Point’s mobile commodity management solutions, click here.
The historic downgrade of the US government debt by Standard & Poor’s (S&P) on Friday has shaken the markets worldwide. Brent Crude dropped $10 and suffered the biggest two-day decline since 2009— highlighting just how quickly commodity markets can swing in the heat of a crisis. Rueter’s reported yesterday that Brent crude fell to $98.74 a barrel, the lowest intraday price since February 8, and was down from an April peak above $127. This week’s market turmoil leaves many asking, what must I do to survive in this global economic uncertainty?
Analysts are warning that oil prices could fall further if a second recession takes hold, but both Merrill Lynch and Goldman Sachs maintain their 2012 price forecasts.
“We believe that WTI crude oil prices could briefly drop to $50 under a recession scenario,” Merrill Lynch said in a note, but it maintained its 2012 average forecast for U.S. crude at $102 and its forecast for Brent next year at $114.
“I don’t think anyone has a clear picture right now,” Brian Hicks, co-manager of the Global Resources Fund at U.S. Global Investors, said Monday, when oil finished the day at $83.10 a barrel. “There are just too many question marks.”
Chief among them: How will the debt downgrade affect U.S. economic growth? Will U.S. consumer spending remain low, and will that impact factory production in China? Will Italy or Spain default on their debt, driving Europe into a recession?
In the midst of this week’s high volatility and uncertainty, C-level executives are turning to their risk managers and asking, “What is our exposure if a double-dip recession becomes reality? What happens to our balance sheet if crude drops to $50? How can we drive profit from this record-setting volatility?” These questions are very difficult, if not impossible to answer with spreadsheets.
Once again, the market is reminding us that it is absolutely critical to have the technology and analytical capabilities in place to run shifting scenarios and understand enterprise-wide commodity exposure. Do you think that commodity price volatility is going to go away? Or that policy risk and global economic uncertainty is waning?
In this environment of rapidly changing information it’s vital to at least have certainty that your data is correct. Triple Point’s Commodity Management Solution provides accurate, up-to-the-minute risk intelligence— arming you with the information you need to make decisions with confidence and certainty. And who doesn’t need a little certainty in these uncertain times?
As part of my series of interviews with Triple Point clients, I recently had the chance to sit down with Thomas Harvey, CIO and VP of Information Technology at The Energy Authority, to discuss industry changes and how they use technology to operate effectively in the energy marketplace.
Q: What are some of the major trends driving your industry and how do you see it changing in the next few years?
Thomas: The Dodd-Frank Act and what’s happening with the CFTC is the hot topic. We’re looking at our business policies and technical systems across several areas–transaction and position reporting; audit-ability; credit management; and documentation–to ensure we’re ready to meet additional reporting requirements.
From an IT perspective, we see technology becoming less about automating routine tasks and processing data; it’s more about mining data for information we can act on. Some of what’s driving this is the world in which we live and our reliance on immediate information exchange. Technology enables us to capture and access huge amounts of data, and the ubiquitous presence of it in our lives means our workforce is increasingly more technically savvy and astute to analyzing the information available to them. Service providers that quickly provide actionable information to move businesses forward will be market leaders.
Q: What are some of the business issues that keep you up at night?
Thomas: Technology is an underpinning of TEA’s ability to operate effectively in the energy marketplace…so we’re always questioning where we should be investing our efforts and resources in terms of improving business processes. We are cognizant of how we can provide reliable, cost-effective competitive advantages to our traders, power managers, schedulers, and analysts.
Q: What were the major business drivers in moving to Triple Point’s Enterprise Solution?
Thomas: Having trading, scheduling, and risk management functionality on a common platform was key. Triple Point enables us to manage both transaction and decision-making information in one solution: physical and financial transactions for power, gas, and oil; scheduling; and credit risk management.
Q: In addition to your current business, how do you see Triple Point supporting TEA’s future expansion?
Thomas: TEA represents 46 Public Power Utilities throughout the United States, and we wear multiple hats to support our partners. Triple Point truly understand the complexities of our business, and this provides great peace-of-mind. With Triple Point, we have the infrastructures in place to support our business strategically, now and in the future. If you really look at what TEA offers, a cornerstone of our business is risk management. The value that Triple Point provides in our risk management practice will continue to be a contributor to our success.
Q: What have been the biggest benefits of implementing the Triple Point Solution?
Thomas: I’d be remiss in not mentioning the exceptional Triple Point staff we work with. Our success with the implementation of Triple Point’s commodity management and credit risk platform is built upon the dedication of some very smart, hard-working individuals. Triple Point provides an outstanding implementation team and superior customer support. They’ve been invaluable in educating our team on the inner working of the Commodity XL product and have been fully engaged in helping craft solutions for our unique requests. It’s really the whole package, Triple Point’s software and people, which brings benefit.
Triple Point Technology announced today that HPCL-Mittal Energy (HMEL) has licensed Triple Point’s Commodity Management Solution to manage crude supply and product marketing, logistics, and regulatory risk including compliance with IAS 39 disclosure and reporting. Triple Point continues its rapid expansion across the Asia-Pacific region (APAC) with new customers in energy, manufacturing, precious metals, transportation, and food and beverage.
HMEL is a joint venture between Hindustan Petroleum Corporation Limited and Mittal Energy Investment Pte Ltd — a Mittal Group company and owner of the world’s largest steel company. HMEL was established to operate a major oil refinery in India, producing high value petroleum products.
HMEL selected Commodity XL™ to provide real-time visibility into market position and exposure and to support supply chain logistics and inventory management.
In addition to HMEL, notable Triple Point customers in Asia Pacific include: DCP Trading Shanghai (base metals, Hong Kong), IFFCO (agriculture, Malaysia), Petredec (LPG trading, Singapore), Prime East (commodity logistics, Hong Kong), New Zealand Mint (precious metals, New Zealand), Incitec Pivot (chemicals, Australia), BPCL (Oil, Mumbai), Reliance Industries (Oil with users in Mumbai, Singapore, London, and Houston), and State Bank of India, HDFC Bank, and ICICI Bank (precious metals, India).
“Asia Pacific is a strategic market for Triple Point, and with offices in Singapore, Pune, Sydney, and Chennai, and over 200 staff in the region, we have the infrastructure in place to provide our current and future customers with competitive advantage,” said Michael Schwartz, chief marketing officer, Triple Point. “We welcome HMEL to our Asia-Pacific family and look forward to working with them for years to come.”
The United Nations Conference on Trade and Development (UNCTAD) estimates that the shipping industry transported over 7.7 thousand million tons of cargo, equivalent to a total volume of world trade by sea of over 32 thousand billion ton-miles. However, managing complex cargo movements of crude and bulk commodities — across pipelines, storage facilities and vessels — remains a very manual and often disjointed process.
I recently had the chance to sit down and talk with Patrick Rooney, President and CEO of Navarik, to discuss how a cargo inspection solution can help reduce operational risk and increase straight-through processing.
Q: What are the typical cargo inspection solutions that companies use today?
Patrick: Because the majority of inspection data flows between external inspection firms and trading organizations (oil companies, trading firms, investment banks) most data associated with physical cargo transfer is gathered manually by spreadsheets, disparate systems, e-mail…even voice mail. These manual processes make it difficult to standardize and automate the cargo inspection process, resulting in great operation risk and cost.
Q: What are the issues/risk of using these manual processes?
Patrick: The trading of bulk commodities has accelerated in recent years. There is a need to standardize terminology and exchange of data between systems to facilitate straight-through processing and accelerate the settlement of trades. In a world where liquidity is being squeezed from the system; it has become increasing important to fully leverage the capital resources you have in play. To the extent that you can shorten settlement time, you essentially need less capital.
Q: How does implementing a cargo inspection solution drive efficiencies and mitigate operational risk?
Patrick: By standardizing and automating the process of cargo data inspection, you dramatically reduce the manual effort required to process inspection data. Another key driver is timely business intelligence. It allows Cargo Assurance to recover more losses from counterparties and helps operations, schedulers, and traders make more profitable decisions when selecting vessels, terminals, and suppliers.
Q: Navarik has seen rapid growth over the last two years. What are the driving forces?
Patrick: By targeting the largest international oil companies, we’ve been able to gain BP, Chevron, and Shell, as well as a major OPEC member, Venezuela, as customers. Our reach extends to over 4,000 users worldwide, including major inspection firms. Billions of barrels of oil are transported by sea every year. The value of the cargo and inherent operational risks and market volatility means companies are looking for ways to improve physical operations, reduce risk, and protect profit margins.
Q: What is Navarik’s focus going forward?
Patrick: We believe the broader oil market will follow the lead of majors in moving to our commodities inspection platform. Additionally, the entire bulk commodity shipping industry offers an attractive opportunity for our partnership with Triple Point. Together we’ll be able to offer a proven cargo inspection solution to not only existing oil customer, but customers in dry bulk commodities as well, including metals, potash, grain, and coal.
Q: What is the value of the Triple Point/Navarik relationship?
Patrick: I believe you succeed with outstanding people as a starting point, and that’s something we’ve seen at Triple Point. So when we look at our teams working together to offer the marketplace a truly integrated platform for straight-through processing — from deal execution, to physical operations, to deal settlement — I think that’s pretty special and something no one else is offering.
Interested in learning more about joint offering from Triple Point and Navarik? Read Triple Point’s Commodity XL for Inspections Powered by Navarik brochure.