Executive summary
The commodity markets have experienced a surge in liquidity over the past decade, resulting in a nearly doubled trading industry. This growth has been largely attributed to the oil trading market, which is estimated to have grown by over 80% between 2017-2021, as well as power and gas trading which has followed a similar growth pattern. However, this surge in value has brought about volatility and competition, highlighting the complex linkages between commodities markets and the financial system. The volatility of commodity price levels has significantly tightened collateral requirements and increased the size and frequency of margin calls. The energy transition has intensified the ESG oversight and pressure on banks and commodities traders, making it more difficult to obtain financing for fossil fuel-related activities. As a result, energy traders and producers are seeking alternative sources and forms of financing but also leveraging real-time treasury (i.e the modernization of treasury management with a focus on real-time data and operations) that helps reduce the need to increase funding capacity.
Implementing real-time treasury requires a sound understanding of both the business and operating model (including technology) of a commodity trader. It’s paramount that the right tool is used for the right flow and in some cases intraday functionality is an important first step to reach near-real time across a wide number of accounts. That is where a treasury management system (TMS) and Application Programming Interfaces (APIs) provide great value. The potential for APIs to deliver faster inputs is substantial and on the rise.
Digital transformation—and, notably, real-time treasury—is necessary in the current environment as corporates strive for real-time monitoring of cash flows, optimization of working capital and the flexibility to respond to rapid changes in the macro landscape. Real-time treasury in energy is here to stay. Corporations who are not keeping up with these trends may soon begin falling behind their competition.
Contributors
Jerome Brun
Executive Director, EMEA Business Development, J.P. Morgan Payments
Mario Benedict
Head of EMEA Digital Channels and Connectivity, J.P. Morgan Payments
Alex Broadhurst
Business Development & Advisory, J.P. Morgan Payments
Fernando Almansa
Director, Zanders Group
Ollie Trist
Senior Consultant, Zanders Group
Arthur Townend
Consultant, Zanders Group
