Reports & others

Authors: David Stack, Managing Director, Agrimax and Rita D' Eclessia, Professor; Director, PhD Programme, 
University of Rome (La Sapienza), Italy. 

EMC Experts David Stack and Rita D' Eclessia were invited to speak at the Energy Risk SUMMIT EUROPE, Energy Trading Stream on October 8th, 2013.

The Relationship between Oil and Gas in Europe - and its Future presentation helped attendees to:

Understand how this dynamic relationship can be modelled, priced and ….traded

• The issue of oil versus gas pricing has been in the headlines for Europeans constantly for the past years.
• RWE recently won an arbitration against Gazprom on this very issue.
• The now significant volumes of LNG in the European market are potentially of great importance.

The Approach

• Analysing price levels and changes, forward curves and their implied volatility as well as implied correlation.
• Understanding Fundamentals "like a trader".
• Understanding shifting benchmark composition.
• Understanding marginal price setting mechanisms and marginal supply / demand curves.

Use 'Best in Class' Risk Analytics

• The dataset: ICE Brent, NBP, ZEE, TTF, PEG, WBC (Baumgarten) in €/MWH
• Stationarity (ADF), Rolling Correlation (Eydeland), Cointegration (Engle Granger relationship), ECM framework
• Neural Networks offer significant predictive capability

The Results
EIA conversion factors: 1 barrel of crude = 1.69 MWH, 1 therm = 0.0293 MWH

Research Topics: Energy Markets’ Volatility Competition and Financial Strategy