LAUSANNE (Reuters) – Executives from the world’s largest trading houses and mining companies are at the FT Commodities Global Summit this week, discussing market trends, cyber security and the impact of Russia’s Ukraine invasion.
MARCO DUNAND, CEO OF MERCURIA”How do you price forward natural gas if you don’t have a view about how things are going to react or what the EU will do on sanctions. It’s hard to price anything right now,” Dunand said.
On the longer term economic outlook, he said: “From economic perspective, Russia will be a loser … they cannot sustain a long period of sanctions. Europe won’t do particularly well either with a refugee crisis at the same time we have to pay higher commodity prices. On a relative basis, we will suffer a lot more than in the United States.
“Chinese are very uneasy with this conflict. They would rather have a strong rather than a weak Russia … The big winner is going to be the GCC (Mid-East Gulf countries). They’re going to be a power broker in this.”
JEREMY WEIR, CEO OF TRAFIGURA
Weir said the company acted very quickly to address liquidity constraints and margin call risks.
“From our perspective, we’re back to normality … Banks assisted in the process.”
Weir also spoke of concerns over potential fuel shortages.
“The diesel market is extremely tight and we’re possibly heading to stockouts,” he said, referring to exhausted inventory.
“Europe can probably afford to pay. The problem is what happens to Africa and Latin America. We’re very concerned about the stockouts due to take place in Africa, which relies heavily on diesel for power generation.”
TORBJORN TORNQVIST, CEO OF GUNVOR
Tornqvist said the natural gas market was broken and that Dutch TTF wholesale gas futures – used as a European benchmark – are no longer fit to be used for the growing liquefied natural gas (LNG) market.
“The tradeability of gas has exploded over the last five years and a proper benchmark to absorb that kind of volume was shown not to be there,” he said.
“The whole thing is paralysed now. We are in the middle of a storm.”
RUSSELL HARDY, CEO OF VITOL
“The shock of the Russian invasion to commodities is enormous. People have reduced activity in futures, there’s less open interest in oil markets which increases price volatility,” Hardy said.
“The longer the war goes on, the greater the chance of an economic recession.”
“If the Russian oil dislocation extends to 2-3 million barrel per day mark, it will be difficult to cope … we expect higher prices and that will crimp demand and we expect more stock releases.”
“We’re seeing some demand destruction already.”
MARCO ALVERA, CEO OF SNAM
Alvera said that blending hydrogen directly into natural gas delivered to factories was an immediate way to create demand for the clean fuel without waiting for new infrastructure.
“If you go up to 10%, it’s still considered gas. We were the first to deliver these blends to existing customers to test what happened in their factories.”
“The ceiling is about a 20% blend otherwise you have to change end-user appliances. That’s a way to create immediate demand and the opposite of what happened with solar and wind, where we had to wait 15 years for costs to fall.”
GERARD DELSAD, CIO OF VITOL GROUP
“We’ve seen in increase in cyber attacks over the years. We monitor closely. It was stable until the beginning of February when there was an attack against several oil companies in Europe and you could see another ramp up the day before the invasion of Ukraine.”
CYRIL REOL, CIO OF MERCURIA ENERGY TRADING
“We are definitely encountering more cyber attacks than before and we’re looking at any kind of event or pattern like someone trying to connect via remote working.”
In terms of attracting tech talent to energy trading:
“There is opportunity for disruption within our industry. We give them the opportunity to be impactful unlike in bigger organisations. Two thirds of our revenue is from gas, power and carbon … and they want to be part of that energy transition.”
(Reporting by Julia Payne; Editing by David Goodman)