Vortexa Event Wrap: Arbs and Analytics
The Vortexa Arbs and Analytics event held in Singapore this week showcased a range of industry speakers who offered their insights into the headline issues that were debated during the annual APPEC gathering.
The Vortexa Arbs and Analytics panel discussion held in Singapore this week showcased a range of industry speakers who shared their insights into the headline issues that were debated during the annual APPEC gathering.
Our first panel was composed of experts from major refining, shipping and trading firms and broached themes such as IMO 2020 and US crude exports. Speakers in the second session looked at innovation in oil analytics, with a follow-up Q&A on digitalisation trends in energy.
For industry friends who couldn’t join us on the day, we recap below some of the key discussion points from both sessions.
Panel 1: Arbs & Analytics
Market preparation for IMO 2020 & VLSFO solutions
- Broadly speaking, the market is considered to be more prepared than a year ago. There was agreement that stability and compatibility (particularly the latter) of very low sulphur fuel oil (VLSFO) products would take some time to settle.
- Currently the sector is initially expected to opt for a VLSFO solution – with views expressed that the industry has had a long runway to adjust, and to test various low sulphur blends.
- The shipping sector still requires more pricing visibility over VLSFO, given the unknowns in delivered barrels when it comes to the bunker fuel market. This in turn feeds some uncertainty over what full demand will be for the refiner.
- China could draw some (limited, and over time) fuel oil bunker volumes away from Singapore if fuel oil tax reforms materialise.
- While there is more clarity about the strategy of larger players in the shipping sector, the projections of the smaller bunker fuel players remains opaque.
- Optimism was expressed that the industry will come up with good solutions – meaning that in 6-9 months, it will be “just as fine as pre-IMO 2020.”
- Forecasts were shared that saw new draws from 2H 2021 for HSFO, taking into account higher scrubber demand and start-up of new complex refineries.
IMO hedging strategies
- A product moving away for use in one category (such as refining), for use in another (blending) was highlighted as a potential hedging tool, with an example to be found in heavy sweet Australian crude, which has been flowing into floating storage vessels.
- Some shipping players have been taking advantage of the forward pricing structure, such as Euronav, with a strategy of bringing their ULCC eastwards (though this was noted as an edge case).
Noteworthy flows this year
- Participants reflected on some of the trade flows that had “surprised” the market in the past year, with Australian heavy sweet crude moving into floating storage once again considered a good example and, representative of certain length in the crude market.
- More US crude might have been expected to come to Asia from the beginning of the year, but the higher than expected cut back of Mideast Gulf crude to the US and Europe, instead saw US crude moving to Europe, in turn curbing flows to Asia.
- It was also discussed that complex refiners might have expected wider sweet-sour differentials, but that sanctions and Opec cuts had limited such price action.
Data Transparency in Oil Markets
- Transparency regarding IMO 2020 data presents a unique challenge as traders are said to be more secretive about strategies. Traditional data gathering means (talking to market) have been more challenging.
- Freight traders are dealing with many challenges surrounding the difference in transparency across the range from small to larger shipowners.
Panel 2: The Data Science Edge
Industry case studies
- Speakers gave examples of ways in which data science can help to “decompose the effect of market drivers”, while underlining the importance of original datasets in building tools to make more informed future decisions
- Geospatial analytics and ‘internet of things’ data growing exponentially; examples of use in the energy industry include tracking infrastructure builds, refinery outages and inventories.
- Vortexa’s CEO Fabio Kuhn presented example applications of data science in oil markets, including our exclusive Singapore fuel oil floating stock data, and our approach to tracking complex small clean product tankers.
- Alternative datasets used in complementary ways alongside more traditional sources by trading market participants.
New generation of data
- Clients of data analytics firms are showing increasing appetite for data, with traditional oil market employers also hiring for technology skills. Analytics and decision-making are getting more technical.
- In terms of the next frontier of energy industry data, examples included how fast electric vehicles (EVs) will be part of the transport mix (demand-side data), while macroeconomic data may can also benefit from more physical world data.
- There’s always been vast arbitrage opportunities recognised by traders – but historically, the steps to make use of any flexibility or optionality would take time. A huge amount of data makes optimisations quicker.