Kilburn's Corner: Pouring Oil on Troubled Waters

When it comes to oil, knowledge is power

Faye Kilburn, deputy editor

Back in August last year when oil prices reached a high of $114 a barrel, it seemed unthinkable that the market could collapse quite so spectacularly as it has over the past seven months.

So absurd was the notion, that Alex Salmond, ex-leader of the Scottish National Party, was willing to wager Scotland's entire future economy on sales of North Sea Oil. At the time of the Scottish Independence referendum, he assured voters that the North Sea would generate £20.2 billion for the country in its first three year alone.

Since then, the price of Brent crude oil has collapsed to less than $50 a barrel and a third of Britain's North Sea companies are reportedly close to going bust. What's more, it has been estimated that the crash would have wiped £15.5 billion off of an independent Scotland's books, meaning that if Salmond had gotten his way, he would now being staring down the barrel of an economic black hole.

As a survivor of January's Snowmaggedon in New York, I can offer personal testimony that demand for fuel is not low, and indeed, last week Goldman Sachs released an analysis paper effectively confirming that the cause of the crisis was an excess supply of global oil. The report also predicted that oil prices will remain low for the foreseeable future, as supply continues to outweigh demand.

But in market data, the story is a different one. Demand for pricing data on oil, and indeed other alternative energy markets, is far outweighing supply, though here at least, vendors are trying to redress the balance.

Take, for example, Tullett Prebon Information, who last week signed data distribution deals with commodity brokerage firm SCB Group and independent commodity supply agent Numerco, to provide customers with biofuel and nuclear fuel data. 

"The good thing about providing data is you're not concerned about whether price is high or low. When markets are volatile, information is needed to add clarity," says Frank Desmond, chief executive of TPI.

This week I also spoke to Campbell Faulkner, chief data analyst at over-the-counter energy and commodities broker consortium OTC Global Holdings (OTCGH), who believes that market data providers have played a vital role in bringing transparency to the energy markets.

"It's not to do with the futurization of swaps or the exchanges. The reason its better is largely because data providers like Argus and Platts publish known quantities of market data. That's not to say they are fixing the market, but they have filled a vacuum and I think it's greatly increased transparency across all the markets," Faulkner says.

Faulkner's point is one I always come back to when discussing the importance of market data. It's the reason the industry pays $25 billion a year for information. Because knowledge is power. Market data is the cornerstone of a liquid and transparent market, and that's especially true when it comes to oil.

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