Twenty-five years on from the signing of the Kyoto Protocol, the global energy sector has completely transformed with the emergence of innovations in renewable energy from multiple sources, yet the need for traditional fossil fuels has remained as national governments navigate their way towards decarbonisation and net zero, Brittany Boles, Senior Sales & Business Development Executive at NovaFori, tells OGN.

 

Where there has been less transformation in recent years, despite remarkable technological advances, is in the pricing and trading of such products.

 

At a time of sharply higher prices – crude oil is up over 60 per cent during the past six months – and huge demand for new sources of oil and gas to replace that from Russia, operating through a truly efficient, reliable and transparent marketplace is vitally important.     

 

Of course, oil and natural gas futures have long been traded on ICE and Nymex, both of which bring price transparency and liquidity to the market. But these futures contracts are for specific grades of the product.

 

The reality is that there are hundreds of different grades and origins of crude oil.

 

In the US alone, there are at least 35 different crudes, while globally it runs into hundreds, nearly all of which are not exchange traded. For most, it’s a physical market. 

 

So, for example, Nigerian Bonny Light closed at $126.98 a barrel on June 10, while Australian Cossack closed at $123.63 and Indonesian Duri finished at $127.98. All similar, all different. 

 

Pricing is based on a range of factors besides just supply and demand, such as sulphur content, API, origin, and delivery terms.  Environmental impact and yield in terms of high-value by-products are increasingly important.

 

Bonny Light has an API of 34.5 degrees and 0.14 per cent sulphur, while Cossack is light, sweet crude with a 48 degrees API and 0.04 per cent sulphur and for Duri it’s 21.5 degrees and 0.2 per cent.   

 

COMPLEX OIL & OIL DERIVATIVES MARKET

 

All of this, of course, has a trickle-down impact on oil by-products, of which there are hundreds across many industry sectors.

 

In the petrochemical sector, within the main product categories – olefins, aromatics and synthesis gas – there are myriad of different products for thousands of different applications.

 

The major olefin derivatives are ethylene and propylene, while aromatics include benzene, toluene and xylene isomers. Synthesis gas comprises carbon monoxide and hydrogen, which are used to make ammonia and methanol.

 

For all these products and their extended derivatives, clear transparent grading and pricing is needed for an efficient market.

 

Take propylene, for example. For this product, which is used to make polypropylene, a plastic resin used in apparel, plastics, furniture, appliances, auto parts, solvents and more, there’s a wide disparity in price according to the region of origin. 

 

At the end of the first quarter, North American propylene for Gulf delivery was priced at $510-$546 a tonne, while in Asia Pacific the FOB Busan price was $1,027-$1,073 a tonne and in Europe FOB Hampton in Germany ended the quarter at $1,370-$1,422 a tonne.

 

The arbitrage opportunities are huge if the grades, delivery times and other specifications can be aligned.      

 

Since the Russian invasion of Ukraine and the imposition of sanctions on Russian individuals and companies, a new layer of complexity has been added to the market.

 

With new reports of Russian oil being exported via refiners in India, the importance of transparency in the supply chain and accurate assaying of products has become even more important than usual.

 

With hundreds of difficult crudes, products and other derivatives, from locations around the world – some sanctioned – the market is inevitability highly complex and lacking in transparency.   

 

TRANSPARENCY, LIQUIDITY & SECURITY WITH DIGITAL B2B MARKETPLACES

 

The need for transparency in pricing and verifiable grading of products are essential for integrity of the market. But very often it’s the over-the-counter brokers who can be well-connected and hugely knowledgeable, but are expensive too.

 

They are often not accompanied by new technology and trading practices, so their operations remain analogue and opaque.

 

The good news is that when driven by auction technology and data science, digital marketplaces provide a means to transform oil trading in a way that’s truly profound, if not revolutionary. 

 

Auction technology of the type developed by NovaFori has been leveraged by both traditional and emerging industries, from fine art to shipping to carbon credits and commodities.

 

In the oil sector, digital marketplace technology can help improve efficiency and transparency in value chains from crude to products. 

 

Data-driven insights extracted from our innovative trading platforms can empower buyers and sellers to secure the best deals.

 

Digital B2B marketplaces, such as those built by NovaFori, deploy enterprise-grade technology combined with auction expertise. 

 

The resultant transactions are cost-effective, transparent, fast and secure, ensuring all parties benefit.