Disparate legacy systems cannot provide the visibility - a single source of truth - needed to stay ahead in today’s energy trading markets. Traders today, especially in energy or commodities, need real-time information on events that could potentially influence their positions; they need access to information from every corner of the global energy market.
Every region brings complexities that could potentially disrupt a trading transaction: shifting supply and demand and/or unpredictable price fluctuation. Energy traders need to understand their own position of risk.
Harnessing all of that information is one of the advantages of cloud computing. An enterprise cloud solution quickly connects the dots of data sources so that energy traders can make informed decisions.
Global trade has promise, but also regulations
Trading opportunities abound in Europe, the Middle East, and Africa, illustrating the need for energy companies to have a full snapshot of macroeconomic factors influencing those regions as well as any production, inventory and supply chain events.
First, consider Africa. A free trade agreement that is capturing the support of a majority of African Union members is expected to unify and strengthen the continent's trading power. Companies might need to shift strategies as African countries continue to ramp up electricity and natural gas consumption, as part of the United Nations' goal to ensure modern energy access by 2030.
In Asia, China is expected to increase energy demand by 85 percent by 2040, while India could see a 300 percent jump by that time, with coal and natural gas driving the surges according to the International Energy Agency.
Meanwhile, although European nations continue to explore alternative energy sources, oil, gas, and coal account for three-quarters of consumption in the European Union according to the European Commission.
In the Middle East, many countries have shifted toward lower-carbon resources; however, energy demand is still rising.
Decision-making tools and analytics can help energy traders capitalize and overcome constant market pressures for greater efficiency on deal making, pricing and risk. A time-pressed risk manager, for example, has only hours, potentially minutes, to make a critical decision about the complete risk profile of a coal dealer's profile before grabbing or ignoring a deal.
On top of the need for speed, energy traders need to make sense of an alphabet soup of compliance and reporting expectations. Look no further than the Markets in Financial Instruments Directive (MiFIDII) that took effect in 2018. MiFIDII closely regulates commodity trading firms that were previously unregulated, requiring them to perform impact assessments based on narrowed exemptions and position limit requirements.
Conforming to MiFIDII means companies must be able to segregate hedging transactions from speculative ones, and their IT Infrastructure is required to monitor positions based on the position limits set per regulation. These regulatory requirements are a tall order for traders relying on disparate on premise technologies.
Cloud computing puts traders in a position of power
Fortunately, cloud-enabled technology solutions can help. With cloud-supported energy trading and risk management (ETRM) software, companies can widen or tighten their view of global markets with the benefit of a single stream of data. They have a single view of positions, risk and profits and loss, along with a full picture of the financials and other operational information that inform regulatory compliance.
A natural gas company, for example, can perform equity volume forecasting, trading and scheduling in a single integrated system, and no longer worry about having to balance several systems as volumes fluctuate or new production comes online. With an ETRM solution, LNG traders, LNG capacity owners, and liquefaction plant owners can manage their positions, contracts and optionality throughout the value chain, as they benefit from a visibility that lets them keep track of supply, markets and transportation routes.
For companies that generate and trade power, the automation of ETRM reduces the manual labor and errors of intraday management, freeing employees to focus on other tasks. Scheduling tools, for example, can generate intraday nominations several times a day, and at different time intervals per market based on different rules.
A cloud-supported ETRM also enables organizations to scale computing power with liberty and ease, adjusting as needs evolve. It also offers remarkable flexibility, allowing organizations to pursue opportunities in new markets without hesitation or IT involvement — drastically reducing operational costs.
To learn more about how Openlink Solutions can work to improve ROI and streamline operations in your business, contact us for a free consultation or no obligation demo.