Data Science in Oil Trading

The oil traders' new edge: data science

Implementing data science into oil trading strategies is one the biggest trends in the market right now. As trading desks shift from traditional discretionary strategies to a data driven approach, we anticipate more resources to be allocated to data science staffing and alternative data sets.

A recent study by Greenwich Associates predicts that in the next 5 years data analysis will become - for the first time - a more valuable skill than market structure knowledge for trading positions. Kevin McPartland, head of Research in Greenwich Associates Market Structure and Technology Group and author of The Future of Trading: Redefining Data suggests: “Putting data to good use will require an influx of new talent to the trading floor, and data analysis will be the most valuable skill on trading desks over the next five years.”

'In fact, this observation is reinforced by a recent survey by Commodity Appointments that showed a staggering 158% yearly increase in data science hires in 2019, with 37% of those hires coming from the oil sector.

Source: Greenwich Associates 2019 Future of Trading

At OilX we interact daily with leading oil trading organizations that are embracing this digital transformation and are already combining data science capabilities with fundamental analytics, adopting the so called “quantamental approach”.

Source: Commodity Appointments (2019)

OilX supports clients in making the digital transition

Building OilX over more than 2.5 years has provided us with an excellent insight on how to build a working data science analytical framework in oil trading – both by making our own experiences and by observing many data science initiatives on our clients’ front firsthand. As a team, we have grown strongly but wisely: we stick to the golden data science rule of 30% commercial people and 70% data scientist in our team composition.

Our own experience proves that the technical start-up approach of start small, think big and scale fast can effectively be applied to data science initiatives in oil trading organizations. We deliver the many learnings of OilX and help our clients emulate the “OilX experience” of combining the tools of a modern hedge fund with the realities of a physical trading house. As a data partner we co-create a toolbox for our clients that provides a data foundation to build on in the future and to make the relevant hires.

We often get asked by clients what is the best strategy to embed data science meaningfully into an already established oil trading operation without disrupting the daily operation? We perceive this challenge as “repairing an airplane while you’re flying it.” The easy route often seems to hire.

At OilX, we believe that the change needs to be more profound and shouldn’t stop by merely hiring an individual. It requires a full data mindset change too. Our advice is always the same:

instead of just hiring, re-engineer your company towards a data centered focus. We believe that data centric architectures will be the way forward for digital innovation:

Source: OilX elaboration on Oliver Wyman ‘Leading Digital Transformation Is Like Urban Planning’ and Liaison Opentext ‘Digital Transformation Starts with Data’

Through our oil analytics work we also advise clients on their transition to a data science driven oil trading operation. OilX’s vision for our clients is simple: We want them to punch significantly above their weight by leveraging our digital tools and market intelligence. We want them to use digitalization as a mean to leapfrog or catch up with their competition.

Contact us for more information or request a demo of OilX here.

The Desk (2019), Greenwich: Data analytics now more valued than market structure knowledge
Commodity Appointments (2019), Oil. Significant talent moves in 2019