Head of Risk and Trading for EMEA shares the significant changes that have occurred recently due to Covid-19

Name:

Rolf-Helge Sørensen

Job title:

Head of Risk and Trading, EMEA

Main role at World Kinect Energy Services:

I am responsible for World Kinect Energy Services’ Price Risk Management and Trading activity within Power, Gas and EUA in EMEA, where I manage a team of 10 Portfolio Managers/Analysts based in Norway.

What significant changes have occurred recently due to Covid-19 that businesses should be aware of?

There has been a general demand shock because of Covid-19, which has led to changes in demand for many businesses around their energy consumption and the price and cost uncertainty arising from this. Our focus has been to manage the risk and minimize the financial impact for them as much as possible.

What energy related challenges do you see businesses facing today due to Covid-19? What can you do to help?

If there has been a big price change, one of the most common questions we are asked is, whether it is best to fix the energy cost long-term, or buy in the short-term market, also known as spot buying.

After a demand shock, we might see a consequential change shock impacting supply going forwards, with energy producers reducing production or shutting down altogether. If, or when this happens, it is difficult to predict prices and we see increased volatility and uncertainty of the market direction as a result.

During the last few years and even more so over the last few months, we have helped many clients build a long-term dynamic energy strategy to ensure they are more resilient to market changes. Important elements in a dynamic energy strategy involve creating a customized approach for each client, factoring in price trends and developing a hedging plan.

Over the years, we have seen energy markets exposed to extreme market conditions and price changes, and we expect this to happen in the near future. Our experience shows that a good strategy and plan can help to overcome extreme situations, such as the one we are facing now.

What ‘business as usual’ projects are you working on?

The team are working from home and are able to do their job as normal. In addition, we have some development projects underway which will help us prepare for the changes we see developing in the market going forward. For example, we are setting up a Price Risk Management service for other commodities, and are setting up a model where it can be more profitable for our clients to take on more risk themselves, as it seems that suppliers’ risk premiums increases for volume tolerance, for example.