Expert delivers upbeat prices forecast as Bayes hosts Greek Energy Forum session

Finance and energy professionals, academics and students heard forecasts for oil,  gas and renewable markets at an event organised by the Greek Energy Forum  hosted by Bayes Business School (formerly Cass) City, University of London last week.

The Greek Energy Forum (GEF) is an international, not-for-profit organisation, with a global membership of energy professionals and academics interested in the energy, shipping and hydrocarbons industries in Greece and southeastern Europe.

Dr Ioannis C. Moutzouris, Energy Research Programme Lead at Bayes, said: “It was a pleasure to host another event of the Greek Energy Forum where, among the presenters, where three alumni of the school and the university. The event was another excellent example of how Bayes forges partnerships between academia and professionals working at the coalface.”

Arhnue Tan, an analyst at BloombergNEF, covering European power markets, presented her team’s outlook for the year – which shows that the market’s outlook for lower power prices is partly down to a 7 per cent rise in energy output, with both hydrocarbons and renewables increasing.

“We do see power prices coming down…This is largely driven by lower gas prices. When we talk about power supply, we obviously look at the key technologies such as nuclear, gas and renewables. Overall for the year, we think energy supply in Europe can grow about 7%.”

Solar energy is the key driver of the surge in renewables capacity, Arhnue suggested, before warning that barriers such as planning permission and national grids being “a little behind in capacity” could limit short-term growth in the sector. High inflation over the last two years has also weakened the viability of some solar and wind projects, she said.

Addressing policy initiatives in Europe and the UK aimed at providing clean and reliable energy at a reasonable price, Arhnue said that governments listened to many of the concerns raised in response to the initial plans for the energy sector markets.

“Initially they were saying ‘let's change the whole merit order system to split renewables from gas generation. After a major discussion, however, the plans aim to evolve power market design, rather than revolutionise it. These proposals will make power sector and power market design better.”

However, governments still have some way to go to scale up measures aimed at managing and reducing demand for energy and making the power system more flexible, she concluded.

Vito Turitto, a senior commodity quantitative strategist, set out the impact of shocks such as the Russian invasion of Ukraine and the attacks on Red Sea shipping on prices in the energy markets.

However, markets are more vulnerable to wild swings when overall prices are low, he suggested.

“When the market drops, volatility increases. The drone and missile attacks on a Saudi refinery in 2022 saw volatility of around 200 per cent. That is crazy given the average oil market volatility of 28-30 per cent.”

The “monumental” importance of the shipping industry is often underplayed or ignored by market players, Vito suggested, even though the impact of disruption is now clear.

The volatility that often accompanies OPEC (Organization of the Petroleum Exporting Countries) meetings is only rarely down to refineries or energy companies but is often driven by speculators – ranging from hedge funds and asset managers to “bedroom traders” – trying to hedge their investments, he said.

Addressing Bayes students thinking of working in commodity markets, he stressed the importance of the options markets in managing investment risk.

“Options have a tremendous impact. Why? Because they are arguably the best risk management tool you can possibly have. some of you will go on to become a trader, like I was at the start of my career. When you get there, the main thing that you have got to look at is risk. You can’t say that you’re going to make the money and other people can take care of the risk…If you don't consider risk, at some point it will come to look for you and you will pay a big price.”

Vito said the post-pandemic surge inflation surge changed behaviours as traders started to “buy every single commodity” to hedge against price rises.

“It seemed crazy, but it wasn't as crazy as that behaviour would have been in the past. used to be. Hedge funds were jumping on the timber futures market and they didn't even know what timber was. They started to buy it because they wanted to watch what happened in the market.”

The depressed and challenging state of China’s real estate market, which is the largest in the world and often used as a proxy for the country’s economy, is one reason Vito is predicting a downward trend in demand for oil – and therefore in oil prices – from late spring.

He expects some volatility for the next 8-12 weeks before prices start a downward trend from May.

Stergios Zacharakis, the president of Greek Energy Forum, delivered a presentation of GEF’s mission, values, structure and new targets.

Noting that GEF reached its’ 10th anniversary last year, Stergios pointed to significant milestones in that decade, including the Greek Energy Awards – which Bayes hosted – and the gender diversity and mentorship initiatives.