Kurush Mistry Tackles the[1] Global[2] Oil Puzzle

Few commodities command as much attention or influence as oil. Its price fluctuations can send shockwaves through economies, alter geopolitical landscapes, and impact everything from transportation to manufacturing. Yet, understanding the oil market has never been more challenging — and the expertise of analysts like seasoned pro Kurush Mistry has never been more crucial.

The past decade has witnessed a perfect storm of disruptive forces including a global pandemic and the accelerating interest in energy transition. These factors have transformed the oil industry from a relatively predictable market into a complex, volatile puzzle that defies conventional analysis.

“There’s been a lot more alternative data, partly because of the availability of new technology, satellites, ship tracking, big data in general, and the ability of companies or providers to process it,” says Mistry. “The real impetus for using this data came from when we were in the immediate aftermath of the outbreak of COVID and at that point, many of the traditional ways of looking at things had to be put aside for a bit, because many things were just so out of whack, so we had to rely on things which we hadn’t in the past. And since then, those data sources have just become part of the regular toolkit.”

Today’s oil analysts face an unprecedented challenge. They must interpret a cacophony of signals from an increasingly fragmented and interconnected global market, where traditional indicators often fall short.

The Alternative Data Revolution

The rise of big data and advanced analytics has transformed how industry experts approach oil market analysis. This shift became particularly pronounced during the COVID-19 pandemic. Analysts turned to unconventional data sources to understand rapidly changing market dynamics. “Looking at, for example, the mobility data that Google used to publish … or looking at monitoring more closely inventory levels that were generated by satellite imagery,” Kurush Mistry explains, highlighting the industry’s pivot toward real-time, granular data.

Despite the wealth of new data, interpreting market signals remains challenging due to the global nature of oil markets. Analysts must maintain a broad perspective while understanding local nuances. As Mistry points out, “You have to have a much more global view. Your models have to be global, and in addition, to get the best information, hopefully you have colleagues or contacts in different locations around the world.”

The growing importance of renewable fuels adds another layer of complexity to oil market analysis. Experts are now required to understand the interplay between traditional oil products and emerging alternatives. Mistry’s recent focus on sustainable aviation fuel, renewable diesel, and biodiesel exemplifies this trend.

The interconnectedness of these markets creates new challenges. As Kurush Mistry explains, “If you’re looking at the production of renewable fuels in the U.S., for e.g renewable diesel and biodiesel, one of the major feedstocks used is soybean oil. Seeing just how that biofuel demand interacts with the global soybean oil market, which has obviously a ton of food and other uses, that in itself is very interesting and challenging.”

Kurush Mistry on Teamwork

In this complex environment, the relationship between analysts and traders has become more critical than ever. The ideal scenario, according to Mistry, is “where you’re working as a team. There is a constant iterative process whereby analysis or models are presented to the traders, there’s constant feedback based on the traders’ experience or information they have, which then enhances or corrects the analysis, and so on.’”

This collaborative approach helps manage the inherent uncertainty in oil markets, allowing for quick adjustments to forecasts and strategies as new information emerges.

The integration of alternative data sources, real-time analytics, collaborative efforts, and a nuanced understanding of global dynamics are no longer luxuries; they’re necessities in this field. The successful oil analyst of today — and tomorrow — must be part data scientist, part geopolitical strategist, and part renewable energy expert.

Moreover, the insights gleaned from oil market analysis extend far beyond the energy sector. They provide crucial indicators for global economic health, geopolitical stability, and the pace of the energy transition. As the world grapples with the challenges of climate change and energy security, the ability to accurately interpret these signals becomes increasingly vital.

The oil industry’s volatility is unlikely to subside. If anything, the puzzle may become even more complex as new factors emerge. The rise of electric vehicles, advancements in battery technology, and evolving government policies on carbon emissions will all play a role in shaping the future of oil markets.

Kurush Mistry attributes the rapid acceleration, at least in part, to COVID-19. “There was a lot of information that was out there, but just it became much more valuable during that time,” he muses. “And then people, having seen the value in some of that, continue to use that information, not necessarily to forecast such large changes as we saw during COVID, but even to fine-tune their models to get a better level of accuracy in more normal circumstances.”

In this context, the work of oil market analysts takes on new significance. Their ability to navigate uncertainty, leverage emerging technologies, and provide accurate forecasts will be crucial not just for energy companies and traders, but for policymakers, investors, and anyone seeking to understand the pulse of the global economy.

The skills analysts like Kurush Mistry honed in decoding the global oil puzzle may well prove invaluable in charting the course of our energy future. The oil market’s complexity serves as a microcosm of the broader challenges of an increasingly interconnected and rapidly changing world.