Insights

Direct Swap Market Alert: Crude starts the new year closing above $50!

  • Crude flat-price and forward curve have crossed the $50 threshold which points to a global recovery.

Direct Swap Market Alert: Crude Recovery?

  • Both the flat price and forward curve for crude (WTI) have rallied in the past month, and point to a global recovery and possible tightness out the curve.

3Q 2020 Oil & Gas Market Update - Is The Natural Gas Market Heating Back Up?

  • Q3 2020 was challenging due to the pandemic, and a slump in natural gas prices.
  • However, producers should be increasingly optimistic about Q4 onward as a sharp rally in natural gas provides hedging opportunities.
  • Both flat price and forward curve structure provide the opportunity to lock-in margin.

2Q 2020 Oil & Gas Market Update - Could This Be Balance?

  • After an extremely difficult first quarter, with simultaneous supply and demand shocks, oil market forward pricing now suggests potential stability for 2H 2020.
  • WTI and domestic grades have flipped from deep contango to flat curves due to cuts from both domestic and OPEC+ producers.
  • However, further COVID-19 flare ups, terminal demand and negative production economics loom as risk factors out the curve.

Commodities: The Next Frontier for Digital Transformation

  • Banks have been slowly migrating manual processes to new FinTech platforms, to unlock efficiency gains and improve client experiences.
  • The recent public health crisis has only increased the need for modern technology platforms to support critical business functions like client hedging.
  • Following in the footsteps of other asset classes moving from paper processes to digital platforms, commodities is next.

1Q 2020 Oil & Gas Market Update

  • Global oil and gas markets experienced simultaneous supply side and demand side shocks during 1Q 2020.
  • US shale E&Ps were particularly hard hit by this market dislocation.
  • Our analysis of 8 oil focused producers highlights the crucial role of hedging in positioning those companies to weather the storm, and prosper in the future.

Hedge Accounting Change Creates Bonanza for Commodities

  • With the advent of organized commodities markets, active trading created price volatility, and ultimately the desire to manage and mitigate commodity price risks.
  • Historical hedging practices combined with an unfriendly US accounting framework resulted in decades of suboptimal commodities hedging practices and outcomes.
  • A recent US accounting standards change provides numerous improvements, some of which are particularly favorable to commodities hedging.
  • We expect these accounting changes will cause an increase in commodities hedging, and a shift in hedging practices that will improve outcomes.

Return of the Yield Curve

  • The U.S. Federal Reserve has begun the process of normalizing interest rates following massive quantitative easing during the Great Recession.
  • Achieving rate normalization is essential to bolster confidence in the economy and will reinstate a normal yield curve after a decade when it was flat.
  • Currently on a path for three increases in 2017, the pace of rate hikes could accelerate if the effect of President Trump’s tax cuts and fiscal stimulus are felt before 2018.
  • The Republican reform agenda contains multiple opportunities for Fed reform, which could alter or potentially derail the current path towards rate normalization.

Direct Swap

Direct Swap’s platform covers the hedging lifecycle from initial decision support through downstream processing. Learn more.

Direct PPA

Direct PPA creates a new paradigm for renewable power in the US with enhanced liquidity and an end-to-end digital workflow. Learn more.