As many of you may know, we are in the process of conducting research into the impacts of the recent and ongoing market shifts on companies participating in the evolving commodity markets. We received very good response so far and a preliminary review of the data is providing some interesting, albeit, early insights into the current state of the markets.

As one might expect with the recent loss of the banks and other trading firms, liquidity is being impacted. However, so far, the data indicate the impact may be larger than some had anticipated. Again, though the results are still coming in, the trend is clear…

We are continuing to collect data for what will be a very interesting and illuminating study of the market. If your organization is active the in energy commodity markets and you have the opportunity to participate, please click below. It should only take 5 to 10 minutes to complete the survey and your responses will be kept confidential.

www.utilipoint.com/2/Commodities2008/

An article in the Telegraph.co.uk paints a disturbing picture of the scientific bodies tasked with monitoring global temperatures and advance of “global warming”. The article, found here, points out some very serious flaws with a recent release from NASA’s Goddard Institute for Space Studies (GISS) in which they declared that this most recent October was the hottest on record. The only problem was that just about every geographic region in the world was reporting lower than normal temperatures and, in some cases, record snowfall. Ultimately, it took a couple of “non-official” websites to sort out the mystery of the obviously incongruent data. Seems the GISS model repeated September temperature data from Russia in what should have been obvious mistake. It appears that Dr. James Hansen, the head of GISS and a close ally of Al Gore, was more than willing to accept an obviously ridiculous result from his model as long as it supported his case.

As the Telegraph article points out...A GISS spokesman lamely explained that the reason for the error in the Russian figures was that they were obtained from another body, and that GISS did not have resources to exercise proper quality control over the data it was supplied with. This is an astonishing admission: the figures published by Dr Hansen’s institute are not only one of the four data sets that the UN’s Intergovernmental Panel on Climate Change (IPCC) relies on to promote its case for global warming, but they are the most widely quoted, since they consistently show higher temperatures than the others.

Spam, the “potted meat product” of choice for survivalists everywhere is apparently in such demand that its maker, Hormel, is having a hard time producing enough.

I guess I’m going to be forced to load up on Vienna Sausages when stocking my own bunker. Apparently you can still get other “potted meats”, such as Underwood Deviled Ham Spread, but having been forced to eat it as child (including as an ingredient in grilled cheese sandwiches), I think I would rather join my dog in eating rocks. I haven’t had that stuff in more than 30 years, but I swear I can still taste it.

I had the opportunity to meet with the SunGard Energy executive team yesterday to get an update on their product strategy and development progress.

While I think SunGard would be the first to acknowledge past difficulties in reconciling a wide and sometimes conflicting product line, what I saw yesterday was an organization that’s operating in lockstep internally and has been executing on a broad strategy to better position their product offerings. Though I’m not at liberty to disclose too much ahead of their announcements planned over the next couple of months, I will say that they have made substantial progress on their previously announced plans to fully integrate their various individual products into a comprehensive solution for the multi-commodity, physical and financial, wholesale energy markets. Keep your eyes on SunGard Energy…

It seemed that with their acquisition by ICE, Yellow Jacket had gone very quiet, almost dormant, other than their weather derivatives business. However, this morning, they’ve issued a new press release detailing a new product, YJ Block, which they describe as “an automated block-trade function that supports broker execution and submission of cleared over-the-counter (OTC) natural gas and power trades, as well as ICE WTI and ICE Brent Crude Oil futures blocks.”

According to the press release…

“YJ Block leverages YellowJacket’s instant messaging and real-time data platform already relied upon by more than 150 commercial trading and brokerage firms. This new patent-pending feature helps automate broker negotiation of complex trade strategies by removing the need to enter, verify and submit multiple trade tickets for one transaction.
“YJ Block is specifically designed to create efficiencies for natural gas, power and oil brokers in the options market,” said Jacob Pechenik, Chief Executive Officer of YellowJacket. “The ability to submit customer trades for clearing automatically to back-office systems with a single click allows brokers to spend more time on transactions rather than manual processing.”
YJ Block is currently used by three OTC brokers following a successful beta test. During the initial rollout, YJ Block reduced costly errors by approximately 75% while reducing entry time three-fold. Additional benefits include:
– One-click submission to ICE’s block trade facility, ICEBlock, for all off-exchange negotiated deals, regardless of the number of legs. Typical off-exchange block trades require the submission of each individual leg for clearing;
– Model-driven delta suggestion and leg premium allocation, leading to fewer deals broken while in delta negotiation;
– In addition to more accurate calculation of premium, YJ Block enables faster deal submission and less paperwork for brokers and the back office;
– Straight-through processing of executed trades directly to broker and customer back-offices, replacing previously manual trade processing;
– Fewer costly errors and trade busts; and,
– Real-time risk management for traders, compared to delayed or end-of-day trade entry, reducing operational costs and multiple ticket entry for brokers and traders.
YJ Block features free real-time front month Henry Hub and ICE WTI Crude futures prices. ICE is offering additional broker rebates on natural gas trades submitted for clearing via YJ Block. More products and enhancements will be added to YJ Block in 2009.”

It’s encouraging to see that ICE is pushing ahead with Yellow Jacket’s technology. However, I still hope to see YJ expand their IM-based trading tools into the wider peer-to-peer physical OTC natural gas and power markets, allowing physical traders to automate and integrate IM-based trades between their industry trading partners. Unfortunately, given that doing so may pull some trades off the ICE platform, I don’t think it’s going to be a priority.

Still for broker executed and cleared options trades, it looks like YJ’s technology is being put to good use.

A couple of weeks ago, my associate Gary Vasey and I were in Geneva to attend EMart, the energy trading show. We stopped by one of the local bistros for lunch and were soon joined in the restaurant by an elderly couple and their friend. They all sat together at a table next to ours, ordered their meal and coffee (with an extra saucer) and proceeded to enjoy a lovely afternoon respite….

Now, I don’t consider myself to be a germaphobe, but dogs don’t wear pants.

Speaking of dogs…funny story…

The younger of our two black labs has, just this weekend, decided that rocks make good eating. The only problem is that they clearly don’t make good digesting. Sometime in the wee hours of this morning, she started firing these golf ball sized rocks out of her “hind quarters” like a canine mortar, coating her crate and the surrounding furniture, walls, floors and rugs with unspeakable substances. Despite the valiant hours-long efforts of my dear wife to clean and disinfect the area, our house may be a total loss, leaving burning it to the ground as our only option.

Prior to drop off at the vet this morning, we’ve scored 3 large rocks and seashell. No telling what else is in there.

UPDATE: After two days, two vets, $1000, and a gastroscopy, we collected another rock and a chunk of plastic; leaving behind what appeared to be a piece of wood…

Quorum Business Solutions, better known as Quorum, is clearly a leader in the upstream oil and gas space. Their TIPS gas plant accounting system has been a mainstay of the marketplace for years. Their products covering land management, division order management, production accounting and other E&P activities have been extremely successful and have fueled tremendous growth for the company over the last decade.

Several years ago they also entered into the ETRM market with their gas marketing application Quorum Gas Marketing. After a flurry of sales, they’d gone pretty quite as far as the product is concerned. However, a couple of weeks ago, they announced a new sale of Quorum Gas Marketing to Mustang Fuel Marketing, an Oklahoma based company involved in gas and oil exploration and production, natural gas gathering and processing, and natural gas marketing.

Does this signal a resurgent push for the product and increased competition in the E&P ETRM market?

UPDATE: And the answer to the somewhat rhetorical question is “yes“. One of the nice things about this blog is that it can help elicit even more information. I’ve heard from an industry contact that Quorum has closed several other unannounced deals for the product this year. Despite not being loud about it in the market, it appears the company has indeed been having solid success with Quorum Gas Marketing.

SunGard Consulting Services is presenting a webinar on “Evolving to a Single, Timely & Accurate Source of Commodities Market Data”

If multiple channels of market data, and their reconiliation, are overwhelming your organization, you should check it out. It will be next Wednesday, November 12th, 2008 at 2-3 pm EST.

For more information, click here.

The election of Barack Obama as the 44th President of the US is clearly a historic achievement and one well deserved as he certainly ran the better campaign.

However, unless you are invested in a favored alternative energy technology like wind or solar, Obama’s election does not bode well for the energy industry. He has not been shy about voicing his views and stating his proposals to “reshape” America’s energy future. Unfortunately, the plans that he’s proposed, if fully enacted, would most likely destroy any hope that America could economically transition to that future.

Amongst his priorities are a return of the windfall profits tax (which will lead to significantly reduced oil production in the US), reinstating the moratorium on offshore drilling, and enacting the most aggressive cap and trade program in the world that would, in his estimation, bankrupt coal-fired generators, not to mention potentially create hyper-inflation as the “skyrocketing” cost of energy ripples throughout the economy, impacting everything from bread to bulldozers. And, despite his push to kill coal as our primary source for electric power, he’s also stated that he’s not a fan of nuclear power and wouldn’t support its expanded use unless new technology can addresses “safety and environmental concerns”.

Should he have the political support in congress to enact his agenda (which, without a constituent uprising, he does), the “old” energy industry in the US is going to suffer greatly. However, the real impact will be on the average citizen who has just recently started to see relief from record gasoline prices. In a couple of years, we are very likely to be nostalgic for the good ol’ days of the summer of 2008.

UtiliPoint International is conducting research to examine the impacts of the recent and ongoing market shifts on companies participating in evolving commodity markets, and we would very much appreciate your input.

To participate in this survey, please simply click on the link below and complete the questions online. The process will likely take around 5 to 10 minutes.

In return for participating in this survey, UtiliPoint will provide respondents with a management summary of the results of the survey when completed. UtiliPoint appreciates your contributing to the industry’s understanding of this important area.

All responses will be kept strictly confidential. To begin taking the brief appraisal, simply click on the following web link:

http://www.utilipoint.com/2/Commodities2008/

If you have any questions, please contact Gary M. Vasey, Ph.D in Europe at +42 0533 433 822 or gvasey@utilipoint.com or Patrick Reames in the U.S. at 713.917.6731 or preames@utilipoint.com