The COVID-19 situation has lead to a big drop in global energy demand. In many power markets it is not uncommon to see negative prices, and the crisis has just added to their frequency. But that WTI oil prices were trading at negative prices was an unprecedented development. Is natural gas the next commodity to go negative? And how robust are trading and risk management systems if that were to happen?
Nobody would have thought this possible – negative oil prices? However, if it can happen to oil, it may also happen to natural gas. Currently, gas storages are full after a mild winter, and also LNG tankers are waiting to off-load their cargo on European shores. So this summer, negative gas prices might become reality… We have therefore prepared ourselves and made all our gas models ready to handle zero and negative prices!
The KYOS software has been adapted to accommodate any level of negative gas prices, both in the spot and forward markets. We have run a wide range of cases to test robustness and consistency of the outcomes if gas prices go negative. Both gas storage and swing contract software models KyStore and KySwing have been adapted to accommodate negative gas prices. Are you already familiar with these gas optimization software models? If not, arrange a demo now!
KyStore is the best option for traders and portfolio managers in natural gas markets. The gas storage optimization software not only raises revenues from gas storage trading operations, but also provides accurate valuations and reduces risk with adequate hedge recommendations. The model uses advanced stochastics including Least Squares Monte Carlo techniques to capture the full optionality in gas storage facilities.
KySwing helps to generate most income from gas contracts by optimizing the swing contract flexibility. Reduce your risk on future income by forward hedging. The model applies advanced stochastics to find the optimal exercise.
All storage characteristics are included in the gas storage optimization software. This includes not only time and volume dependent injection and withdrawal rates, but also time varying costs, interruption rights and reduced availability because of maintenance.
Last but not least, KyStore and KySwing are fully embedded in the KYOS Analytical Platform. Automated data feeds ensure that you get up-to-date trading recommendations every day. Transparency is guaranteed, because analysts can evaluate each individual price scenario.
Is your system ready to capture negative gas prices? Or would you like to see how easy and intuitive our models work? Contact us for a free demonstration of our software models now – just fill in your details in the black section below.