Global oil markets have been on a wild roller coaster ride over the past three years as first Covid-19, then geopolitical tension sent prices plunging and soaring. Trading in volatile oil and bunker markets is not for the faint-hearted but it can be done. The key is to take a proactive and strategic approach.
Over the past three years the price of Brent crude oil has surged from a low of $22/bbl soon after Covid-19 was first identified to a high of $122/bbl following Russia’s invasion of Ukraine. The average price was a touch under $100/bbl.
According to the International Energy Agency, the lifting of pandemic restrictions in China at the beginning of this year is expected to drive a surge in demand for oil as the world’s second largest economy takes up half of 2023’s demand growth. Although the Brent oil price is unlikely to reach last year’s stratospheric levels, experience teaches caution.
Taking the long view, it’s not the peaks or troughs that should surprise so much as the swiftness of the response to global events.
In short, the oil and bunker markets should not expect any easing in volatility. Indeed, they should anticipate rapid reactions to geopolitical events, threats, decisions, even rumours. The question must not be: how should we react to this volatility? It must be: given this volatility, how should we prepare?
Preparation should not be a single safeguarding decision but a policy of constant reflection on industry vulnerabilities, expected political responses to threats, the state of the markets, and pricing insights. Preparation should also repeatedly consider what products are being sourced, from which companies in which regions of the world.
To plan for the effects on your business operations, you must start at the top level in order to mitigate the effects on your company. It is necessary to develop and implement a risk
management policy that is driven by both financial and operational factors. Customers of marine distillates, HSFO & VLSFO can simply be proactive in planning for such eventualities by obtaining products and set prices in advance of the expected potential volatility and supply disruptions.
A faster and more efficient response to protect your organisation is made possible by having a policy in place and comprehending the always evolving situations in this global market. Being proactive and thinking strategically means preparing for the unexpected.