Where’s the Profit?

It’s been quite meager times for commodity traders over the last couple of years. Profitable trades are getting harder and harder to find as arbitrage and basis disappear. Market initiatives like European power market coupling actually erode basis by creating a broader pricing zone and, in power, the profitable trades have moved closer and closer to the moment of generation where uncertainties are greater due to renewables. However, the erosion of profit is an industry wide phenomenon according to the Bloomberg article from earlier this week covering the Global Trader Summit. Part of the problem, according to the article, is that markets are becoming increasingly transparent. “Everything is transparent, everybody knows everything and has access to information,” Daniel Jaeggi, the president of Mercuria Energy Group Ltd., said on Thursday at the Global Trader Summit organized by IE Singapore, a government agency that promotes international trade.” The article makes for interesting reading and certainly agrees with what we are seeing at ComTech. More regulations around transparency, movements to standardize and couple markets, and the general background of lower commodity prices in what is often a buyers market, are removing much of the obvious profitable trades. This is forcing traders to look

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Source: CTRM Center

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