Data science is about recording, storing and analysing massive amounts of data in order to extract useful information and uncover intelligent information for organisations. In recent years, companies across all sectors have been implementing data science in order to become more efficient and the oil industry has not been an exemption.
What used to be one of the most traditional industries is now adopting this trend at a surprisingly swift rate. From major oil companies partnering with top technological firms to automate oil field discoveries to oil traders implementing trading algorithms, the oil industry is embracing this change and by doing so, data is becoming more valuable.
On the physical side, major oil companies have teamed up with technology partners such as Google, Microsoft or Amazon in order to automate their exploration services. With the help of machine learning techniques, oil firms are now able to process huge sets of geological data and accurately identify the presence of oil. According to a Vox article, in 2018, the oil and gas industry spent $1.75 billion on Artificial Intelligence and predicts this number to grow to $4 billion by 2025.
Oil trading is another part of the oil market that is currently being deeply transformed by data science. 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.
Share of Data Science talent acquisition in 2019
As the oil industry shifts towards a more data driven decision regime, the importance of faster and more accurate data will grow in the upcoming years.
Supporting clients in making the digital transition: OilX case study
OilX provides a digital twin of the global oil supply chain and oil market intelligence. At OilX we interact daily with leading oil trading organisations that are embracing this digital transformation and are already combining data science capabilities with fundamental analytics, adopting the so called “quantamental approach”.
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 but we believe that the change needs to be more profound. Our advice is to re-engineer your company towards a data centered focus instead of just hiring. We believe that data centric architectures will be the way forward for digital innovation.
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. 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 organisations. 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.
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 digitalisation as a mean to leapfrog or catch up with their competition.