Commodities Research House of the Year: BNP Paribas

BNP Paribas has repeatedly demonstrated its ability to formulate strong views and publish reports when a turning point has emerged in the market. Reports are often limited to two pages in length so, while information is concise, clients say the research adds a lot of value.

“Our commodity strategy group is not about quantity but quality. The value added is to be found in targeted and focused guidance provided at the pertinent time,” says Harry Tchilinguirian, London-based head of commodity market strategy at BNP Paribas.

“I think it’s excellent,” says one client who preferred not to be named. “I read their oil, natural gas and their base metals research, and I think it’s very objective. They present technicals but also their own views. In my opinion, they are among the best, especially when it comes to their oil research.”

The commodity market strategy team at BNP Paribas isn’t the largest in the industry, nor is it the longest established, but it has consistently provided high-quality research and has doubled in size through the timely appointments of three commodity strategists in 2011.

By adding Houston-based Teri Viswanath, BNP Paribas has been able to expand its coverage to natural gas in an environment that has seen prices fall to 10-year lows and people hungry for information. Similarly, the addition of London-based oil strategist Gareth Lewis-Davies – a former head of market analytics at BP – is also pertinent given the uncertainty around oil and oil product prices. BNP Paribas has also appointed agricultural strategist Mehdi Chaouky, also in London, to provide coverage of a sector which is likely to become increasing complimentary to oil products through growth in biofuels markets. 

As investors and hedgers become more sophisticated, so too are their requirements for research and analysis. The BNP Paribas commodity strategy team provides not only forecasts on flat prices but analysis and trading ideas on curve shifts, option volatilities, time spreads and relative-value strategies for similar commodities. 

“We focus both on single commodities and the internal dynamics of a given commodity sub-sector to produce relative value analysis alongside flat price views. This gives greater scope to the research and deepens clients’ understanding of the calls we make for individual commodities,” says Tchilinguirian.

Some recent examples of BNP Paribas making successful relative-value calls include tin-nickel spreads, gasoline cracks, fuel oil cracks and crude oil time spreads. Recommendations that have been particularly successful have been to go long pre-summer driving season US gasoline cracks and to short the Brent crude December 2012/December 2013 timespread contract.

As well as providing coverage on the more sophisticated parts of the commodities market, BNP Paribas has proved to be successful in providing coverage for flat prices on gold, copper, sugar and oil. Specifically, the team’s call on Brent crude is the one Tchilinguirian is most proud of.

“If you look at the updates we have made to our crude oil forecasts, they have only been within a few dollars of the initial forecast over the past year and a half. This reflects the fact we ground the analysis on strong assumptions and we are prepared to hold the line,” he says.

The most recent example of BNP Paribas’ accuracy is its first-quarter 2012 Brent price forecast of $119 a barrel (bbl). The forecast was first published in November 2011 as a bullish revision to the previous price of $115/bbl. This was when markets were tumbling on the back of eurozone worries. By the end of the first quarter of 2012, the price of Brent crude averaged $118.45/bbl, making BNP Paribas the most accurate among the 13 institutions that submitted price forecasts to Energy Risk’s oil price outlook.