Improve energy spend with Flexible Commodity Purchases….
Market Dynamics and Price Fluctuations
Commodity prices are inherently volatile due to various factors — supply and demand, geopolitical events, legislation, and more. Here’s why timing matters:
- Supply and Demand: The basic economic principle of supply and demand significantly impacts commodity prices. When supply exceeds demand, prices tend to drop. Conversely, scarcity or increased demand leads to price hikes. By timing your purchase during favourable supply-demand conditions, you can secure significantly better prices.
- Seasonal Patterns: Many commodities exhibit seasonal variations. For instance: energy demand often spikes during winter (heating) or summer (cooling). Timing your commodity purchase strategically can save costs.
Historical Trends and Cycles
Analysing historical data reveals cyclical patterns in commodity prices. Consider planned maintenance schedules for gas pipelines that occur in August and September. The maintenance is scheduled months and years in advance, so customers should conclude contracts/commodity purchases pre-maintenance season to avoid predictable price spikes that can easily occur due to lower capacity at this time.
- Boom and Bust Cycles: Geopolitical tensions, energy policies, and global events influence energy prices. Understanding these cycles helps your commodity trader to time your purchases effectively.
Geopolitical Events and Immediate Effects
- Political Instability: Regions with major commodity production can experience tumultuous events. For example, Russian/Ukraine tensions impact on gas markets. By monitoring geopolitical events, you can make informed decisions.
Technological Innovations and Production Costs
- Advances in Technology: New technologies affect production methods and costs. For instance, fracking revolutionised natural gas supply, leading to lower prices. Being aware of such innovations helps you time your purchases.
Capturing Opportunities
- Market Timing: Opting for a contract that has Commodity Trading built in, enables your organisation to benefit from monitoring commodity prices and adjusting orders accordingly, the commodity trader will capitalise on changing market conditions. Such flexibility is the key to ensuring a competitive price.
Conclusion
While choosing a reliable supplier is crucial for customer service, the right timing can significantly impact your bottom line. If your organisation is fortunate enough to qualify for a Flexible style contract, of which we offer many types, this is our plea for you to consider it. Direct Power has a range of Flexible contracts to choose from, ranging from an entry level product suited to a flexible first timer, to fully bespoke solution for the more experienced client. Best of all, you don’t have to do the work, we have a commodity team ready to take care of all your commodity purchasing needs. The benefit of professionally managed commodity purchases far outweigh the old school approach of comparing multiple supplier fixed offers on a given day. Remember, all suppliers buy and sell energy on the same markets, so there will be minimal difference from competitive suppliers on any given day. It is the actual “day” the commodity is secured that will have an outsized impact on your energy spend, not the supplier you sign with.
Flexible curious? Next steps:
Get in touch with Direct Power to review your energy needs and determine an appropriate Flexible strategy, as this will be the key to cost-effective commodity purchases!