In today's energy markets, characteristically low natural gas prices and relatively stable oil markets have led many companies to adopt a"wait-and-see" approach to risk management. While the temptation to delay action until markets improve is understandable, this strategy could leave significant value on the table and expose your organization to unnecessary risks.
In January 2024, one energy company captured nearly seven figures in additional value through proactive risk management – double their annual advisory retainer in a single month. Their success wasn't luck; it was preparation meeting opportunity. As energy markets present historically low natural gas prices and stable oil markets, companies that wait for "better conditions" risk missing similar opportunities while incurring hidden costs that compound over time.
When markets appear unfavorable, many energy companies delayimplementing comprehensive risk management strategies. This"wait-and-see" approach creates three critical vulnerabilities:
1. Infrastructure Delay Penalties
Time Cost: 4-6 weeks average setup time for trading accounts.
Opportunity Cost: Missing short-term price spikes whileestablishing infrastructure
2. Pricing Disadvantages
Cost Impact: Wider bid-ask spreads for new market entrants
3. Missed Outer-Year Opportunities
Hidden Value: Current outer-year contracts often trade at a premium
The winter of 2023/24 illustrated how preparation meets opportunity in energy markets. As a polar vortex drove temperatures down across the lower 48 states, surging heating demand and infrastructure pressure created significant market volatility. Early January forecasts predicted winter storms, setting the stage for dramatic price movements in natural gas markets.
Our team's proactive approach turned these challenging conditions into opportunities. We identified premium pricing opportunities in early January through daily market monitoring and swift action. The strategy involved locking in fixed prices on targeted volumes through month-end while maintaining flexibility for production variations. Rather than following the traditional first-of-month pricing approach, we actively managed physical and financial positions throughout the period, making regular pricing adjustments as market conditions evolved.
The results were compelling: the client captured a nearly seven-figure mark-to-market improvement in January alone. When winter storms later drove prices down, our client's secured positions proved invaluable, withJanuary's gains amounting to nearly double the annual advisory retainer. The client's CFO noted, "Based on their recommendations, our companycaptured nearly double the annual retainer in January alone." The success extended into February, with additional volume sales securing continued gains. This case demonstrates how prepared market participants can transform volatility from a threat into a substantial opportunity.
The winter case study demonstrates how comprehensive riskmanagement delivers results. Here's how to implement similar strategies in yourorganization:
As demonstrated in the case study: Earlyidentification of premium pricing opportunities in January came from systematicdaily market monitoring.
Implementation Options:
· Internal Team Approach: Dedicate resources todaily market analysis and pricing reviews
· Mobius Support: Access our team's daily marketintelligence and analytical tools through RiskNet, ensuring you never miss anopportunity
· Hybrid Model: Leverage Mobius's market data andanalytics to enhance your team's capabilities
As demonstrated in the case study: Active managementof physical and financial positions throughout the month, rather than "setand forget" strategies.
Implementation Options:
· Internal Team Approach: Regular review of hedgepositions and structuring analysis
· Mobius Support: Tap into our expertise forportfolio structure recommendations and optimization strategies
· Hybrid Model: Use Mobius's analytical toolswhile maintaining internal control of execution
As demonstrated in the case study: Maintaining flexibility for production variations while securing advantageous pricing.
Implementation Options:
· Hybrid Model: Leverage Mobius' expertise for strategy development while maintaining internal execution
As demonstrated in the case study: Systems should be in place to act quickly on opportunities
Implementation Options:
Our case study client succeeded because they had:
1. Continuous market monitoring (supported by Mobius' daily analysis)
2. Swift execution capabilities (through established infrastructure)
3. Flexible strategy adaptation (enabled by experienced advisory)
4. Active position management (backed by analytical tools)
Whether you build these capabilities internally or partnerwith Mobius, having these elements in place before opportunities arise is key.Our role can range from:
The winter 2023/24 case study demonstrates that success in energy markets isn't about waiting for perfect conditions – it's about being prepared to capitalize on opportunities when they arise. Even in seemingly quiet markets, companies that maintain active risk management strategies position themselves to capture significant value when market conditions shift.The time to prepare isn't when markets are moving – it's now.
1. Assess your current capabilities against the keycomponents above
2. Identify gaps in your market monitoring andexecution infrastructure
3. Determine whether to build internally orleverage external expertise
4. Begin implementing systems before the nextmarket opportunity
Our team can provide a detailed capability assessment andrecommendation plan for organizations interested in exploring how Mobius cansupport their risk management efforts.
Preparation and capabilities often determine the differencebetween capturing and missing opportunities. Whether you develop theseinternally or partner with experienced advisors, the key is having them in place before market conditions shift.
Remember: Risk management isn't just about today's prices;it's about building sustainable, long-term approaches that protect and enhancevalue across market cycles.
Empowering clients to succeed in global commodity markets with award winning technology and expert advisory.
