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Trading up

A look at some current issues facing energy and commodities traders


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In recent years, physical energy and commodities trading has entered a new era of sophistication and scale. Changing global economic conditions are giving rise to exciting new opportunities, but also hazards. International trading houses – whether in oil, metal or soft commodities – are extending their reach and scope, while expanding control of supply chains. The expectation of stricter regulation, financing constraints, emergent resource nationalism, and fierce competition reward agility and adaptability as never before.

Traditionally, the success of traders depended on their superior knowledge of prices at different locations combined with their logistics capacity to move goods at the right time to the best markets. The energy and commodities trading sector has, however, been transforming rapidly.

Trading organisations, in general, and independent ones, in particular, are often thinly capitalised and highly dependent on debt – especially short-term debt financing – to carry out their typically high volume and low margin business.

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