Energy Commodity Trading

• In our world, we define “Trading” as the business of operating non-speculatively to buy/sell, hedge, move, exchange, blend, deposit, store or transform a physical commodity while taking account of price & basis risks and time value.

• Every client is entitled to define its unique appetite for risk.

• We don’t structure to avoid risk, but to deliver a quality of income reasonable in relation to the (conscious) risk-taking will and capabilities of the business owners.

•  We coach a commodity trading teams in respect of the organisation structure and levels of awareness required to deliver the owners’/stakeholders’ definition of “Trading”.

• There is of necessity a large element of parallel activity and mutual determination in devising optimal organisation structures and integrating the functioning of people within them.

• If you want to figure out how to take positions and trade speculatively, you need to talk to someone else.

We have real-life expertise of shifting active commodity trading teams from unstructured, to structured & integrated entities in the private and state/agency player spheres. Structure does not imply stifling creativity.

It involves:

• Auditing for the level of Organisational Awareness and Risk. Do all the instruments necessary to “fly your business”, appear on your business’ instrument panel, are they in front of the right people - and wired up?

• Assessing the level of understanding of managing commodity transaction risks (price, price-timing, basis, transportation, volume tolerance, credit/payment, counterparty/performance, contractual, insurance and more).
   
• Dynamic Mark to Market (price and event): Integrating Deal and Market data capture processes.

• Developing tools to identify, monitor and act on securing relevant supply/sale arbitrages.

• Building supplier/offtaker evaluation tools which match the business model of the client.

• Identifying and building a robust and independent commodity organisation structure, transaction delivery units and related reporting lines which meet the strict criteria of internal risk management and -reporting demanded by banks and other      financial stakeholders.

• You can’t tell the time of day without defined components of your organisational “cogwork” “meshing”  in an integrated organisation structure.

It involves:

• Building and/or Re-Honing Energy Commodity Teams.

• Defining roles and integrating people with the “cogwork” defined in the section on organisation.

• Building up team awareness of relevant spot and forward markets in commodity swaps/futures and basis, currency, interest rate and transportation markets.

• Responding dynamically to hedged positions or market changes to capture option value.

• Negotiating and structuring trades to be optimised for option value within respectable boundaries of counterparty indifference.

• Achieving cultural adaptability/sensitivity and navigation across global market locations.

• Accepting the principles of Teamwork – functional, geographic, cultural.

• Dynamic strategy and goal-setting.

• Establishing and monitoring delegated levels of risk and ownership of “risk cubes”.

• Embedding a compliance, anti-bribery and responsible corporate citizenship culture.

• Defining a core organisational culture and values that people from different backgrounds and cultures can adhere to.

• You can’t rely on checklists to drive behaviour – moral leadership comes from the top and always matters.