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Refiners and Traders Need to Brace for Uncertainties Led by Energy Transition

Volatile oil prices and the energy transition agenda sweeping across Southeast Asia have prompted traders and refiners to apply strategies that will cushion them from big losses amid market risks, said experts.

Energy and commodities company Vitol’s global head of research Giovanni Serio said although predicting curveballs in the market is difficult, positioning funds wisely could prove to be advantageous for traders to make modest gains.

“But now, we are in a much more balanced market doesn't mean there is not going to be a new source of volatility going forward, but at least the sources of volatility that characterise the last three years seems to have abated,” said Serio while addressing Covid-19 pandemic and western sanctions on Russian crude and product exports disrupted the market in the past three years.

“You also need to have a fairly diversified asset base across the supply chain and geographically because you don't know exactly where the bottleneck of disruption is going to come,” he said at the Energy Asia 2023 Conference on Tuesday (June 27).

Meanwhile, Petco Trading Labuan Company Ltd chief executive officer Shamsul Bahari Salleh said refiners will need to be forward looking and find a way to transform existing refineries to match a shift in product mix arising from the energy transition agenda.

He said demand for oil in the near term will peak before it sees a decline.

“We can always adjust the refineries according to the industry requirements. So if in the future, let's say for an example there are more demand for biofuels, we can convert and adjust accordingly in refineries within Malaysia,” he told The Edge on the sidelines of panel session titled “Refining & Trading: Riding the Market Dynamics to Stay Ahead”, at the three-day conference.

Currently, refineries in Malaysia typically produce diesel, gasoline, jet fuels, and liquefied petroleum gas.

However, these refineries can be converted to produce biofuels, he said.

“In order for us to stay relevant and continue to be economically profitable we have to be adaptive, agile and be able to manage the process within the refinery.

“So the challenge for the refineries is actually to stay relevant, try to adapt to the processes so that we can still be relevant to the requirements of the market,” said Shamsul.

Source: The Edge Markets

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