Geopolitical risk has always been a factor in commodities markets. Low oil prices and international sanctions continue to cause instability in Russia, Uzbekistan, and Turkmenistan. In addition to cheap oil, violence in the middle east threatens stability; ISIS continues to cling to key territories in Iraq and Syria and will continue to grow organically throughout the middle east and north Africa.
However, what has changed recently is that the source of uncertainty is not only coming from non-westernized countries but now from a westernized country in the eurozone: Greece.
Tragedy, as any scholar will know, is of Greek origin. In fact, the word tragedy is derived from the Greek word tragoidia which is itself likely derived from the Greek words for 'goat' and 'song.'
Tragedy — a form of drama based on human suffering that invokes in its audience an accompanying catharsis or pleasure in the viewing
How apt then, in so many ways, that the crisis afflicting the eurozone is one involving Greece, its debt mountain, and its economy. Actually, the Greek crisis has dragged on for years already and most commodity players that can have long ago reduced or eliminated their exposure to Greece along with one or two other potentially equally tragic eurozone economies. However, is the Greek crisis having a broader impact on commodities?
Background of the Greek Crisis
The Greek crisis first came to light as long ago as 2009 when fears emerged that the country would not be able to meet its debt obligations as a result of revelations that the Greek government had seriously misreported its debt levels. A crisis of confidence occurred shown by a widening of bond yield spreads and increases in the cost of risk insurance on credit default swaps. By 2012, the true depth of the Greek tragedy was revealed, as the country became the owner of the largest sovereign debt in history. By June 2015, another first occurred in which Greece became the first country to miss an International Monetary Fund (IMF) loan repayment.
For Greece, this has been catastrophic. The usual solution to its problems would have been to allow its currency to depreciate, but Greece no longer controls its currency, the euro, and was unable to follow this course. Instead, to become more competitive, Greek wages fell nearly 20% from mid-2010 to 2014, a form of deflation, and serious austerity measures were demanded of the country. This led to a significant reduction in income and GDP, resulting in a severe recession and a significant rise in the debt-to-GDP ratio.
Unemployment has risen to nearly 25%, from below 10% in 2003. However, significant government spending cuts have also helped the Greek government return to a primary budget surplus, meaning it now collects more revenue than it pays out, excluding interest.
Over the last two months, the situation came to something of a head but a major crisis does appear to have been averted by the Greek government's more or less acceptance of its creditors' demands. However, whether the demands are turned into laws by Greece’s parliament and what happens next continues to paint a murky picture. In terms of the larger picture, there is a degree less murkiness as the eurozone has almost certainly been damaged and the euro weakened. In fact, the IMF remains concerned about European growth and unemployment.
Given the weak medium-term outlook, a stronger collective push is urgently needed to consolidate the recovery, raise potential growth, and strengthen the union's resilience. 
— from the Wall Street Journal, 'IMF Sees Trouble for Eurozone Beyond Greek Crisis'
Effect on Commodity Markets
So what’s the impact on commodities, if any? The crisis has been going on so long that most commodity exposures to Greece have been minimized or eliminated already so there is probably, at this stage, little direct correlation. However, the Greek crisis continues to consume eurozone politicians and the IMF, who see the broader impacts. European growth is weak and set to remain weak. In Q1 of this year, growth was just 0.4% and forecasts for Q2 are no higher. Inflation remains very low also. The euro continues to be weak versus the dollar. The EU has experienced a triple dip recession and will be slow to recover.
All of this means that European demand is lower than perhaps it ought to be. When set against a global glut of commodities, weaker demand from Asia and all of the other woes currently impacting demand for commodities, it is simply yet another piece of bad news that is helping the market’s downward momentum. A weaker euro versus the dollar aids and supports this by making even lower priced commodities seem expensive in Europe. For example, the fall in oil prices has been, to some extent, offset by the rise in the strength of the dollar; meaning that, in recent months, gasoline prices at the pump have been more or less static.
Impact to CTRM Software Market
Regardless of the cause of low prices in commodity markets (whether due to the Greek crisis, oversupply, weak demand from Asia, strong US dollar, etc.), the real issue is price volatility, not low versus high prices. Price volatility continues to be a challenge in today’s markets and drives the need for the most advanced CTRM software solutions.
Despite low commodity prices and low European growth rates, there has been more activity in terms of CTRM software procurement activity in Europe recently. The reasons for this seem to be a combination of regulatory pressures (EMIR, REMIT, and the planned MiFID2) as well as the need to upgrade technology after a prolonged period of cost savings. (See "Warning Signs That It's Time to Replace Your ETRM or CTRM Software.") Uncertainty in the markets will continue to grow and the time has come to make investments to remain competitive.
