(Updates with more executives’ comments)
LAUSANNE, March 29 (Reuters) - Top executives from the world’s largest commodity trading houses discuss trends in trading at the FT Commodities Global Summit in Lausanne, Switzerland, this week.
For highlights from the first day:
The following are the latest highlights:
Echoing remarks by Mercuria’s CEO on Tuesday, Jaeggi sees a coming crunch as short-term investments are prioritised over long-term.
“There is imbalance right now which is getting bigger ... when you look at 2018, 2019, 2020 what you’re seeing is short cycle investment that is hedging on the back-end of the (oil price) curve ... pushing it down.”
“In the medium term, 3-4 years, there’s a potential to create the next big imbalance. You’re going to miss at some stage the big, long-term investments. It’s sowing the seeds for potential instability and volatility in the future.”
BEN LUCKOCK, CO-HEAD MARKET RISK, TRAFIGURA
“What’s interesting for someone like Trafigura is that U.S. flows are changing and it gives you something to look at every single day. The greater Gulf coast - it’s the new release valve for the global oil market,” Luckock said, adding that initially U.S. flows went to Europe first then to Asia.
Luckock also sees a crunch coming due to short cycle investment.
“The best ones (producing assets) are being used up now, low hanging fruit ... It’s coming home to roost sooner than people think.”
Trafigura is a major lifter of crude from Iraqi Kurdistan, which Luckock says is becoming less controversial.
“The buying group has certainly increased, a lot of these barrels go to Asia. Some refiners still refuse because of their relationships with Baghdad. But it’s a significant flow. It impacts the balance around the world.”
Cross said it typically takes 30 days to process contracts prior to payment and can take longer depending on the product.
“In our test case, within four days we got all electronic documents in and certainty of settlement ... It’s a significant number.”
Cross also sees blockchain technology as a way to reduce high-level fraud and cut back office costs.
“Our industry is very paper based and we have the technology now that can solve the complete settlement cycle ... Back office costs are a focus for all the companies and an area where we can make significant savings.”
“A lot of instances of fraud - it’s high tech. The information on the document looks real and recognizable by counterparts. With blockchain, you can have a verifiable, authenticated (document) and only a person with a secure login can send that document.”
“The context for our strategy is laid out in fundamentals until 2035. We see energy demand increasing by about 30 percent, half from nuclear, hydro power and renewables ... half will be going to the power sector.”
“But we see 75 percent of energy demand still coming from oil, gas and coal. Gas demand will grow at approximately twice the rate of oil ... on the renewable side we will focus on our commitment to wind and Brazilian biofuels.”
Alvera sees emerging markets moving towards gas away from coal due to the cleaner advantage of gas.
“A one percent switch from coal to gas, gives same benefit on carbon dioxide, as a 10 percent shift to renewables.”
“In Europe, demand for gas has stabilised but production is declining. Faced with stable demand, imports need to grow ... we can only look east or southeast like the southern corridor.
“Europe has huge opportunities for LNG storage due to huge depleted reserves. LNG will become hugely seasonal ... and very distressed in the summer. Italy is a unique position because has largest gas storage reserves so can be a hub for imports and exports.”
“In the United States, coal will be back, which potentially in the short term will benefit gas in Europe, and the price of coal will go up.”
“There’s a huge potential for biomethane in transport ... the beauty is that you can use existing infrastructure.”
“The switch from coal to gas is a bigger thing than any switch to renewables.”
“Batteries are about to happen. The first large scale delivery will start in July ... Whether they will live up to the hype is another thing. They still are not cheap enough.”
“You can see the grim reaper for fossil fuels in the rear view mirror. In Chile and Argentina ... in non-subsidised tenders, renewables win. That’s extraordinary compared to five years ago. Eventually it will catch up in the northern hemisphere.”
“Coal needs to go, lignite needs to go but it needs to be politically led ... Batteries in my view are completely overhyped.”
“The influence of Washington D.C. is limited ... in terms of subsidies, it’s more about the state than D.C.,” Leupold said, when asked about U.S. President Donald Trump’s executive order undoing Obama-era climate change regulation.
Reporting by Julia Payne and Gus Trompiz, editing by Louise Heavens and Susan Fenton