The oil trading sector’s continuing move toward process automation is triggering a migration of talent to digital service providers
Oil trading remains a difficult place to capture value. The use of algorithmic strategies continues to spread, and proprietary information is all but disappearing as fundamental data become more widely available from digital vendors. Trading groups’ efforts to cut costs by starting to automate processes with the use of technologies such as Blockchain make sense as they cut transaction times and require a lower headcount, but some are wondering where the process is leading.
Automation is likely to cause significant staff attrition. This will be the case particularly in the middle-and back-offices, where less people will be needed to work on the life cycle of each trade, but we also expect the number of operators, analysts and pipeline schedulers to drop. It is too early to estimate exactly what percentage of people could be affected, but the head of value-chain optimisation at a big merchant refiner recently told us that the majors’ trading operations could turn out to be around 25pc overstaffed once automation takes hold.
The use of automated services in the trade life-cycle and analytics space is growing fast, and the list of vendors is rising. One high-profile example is UK-based Blockchain platform VAKT. The company, which is backed by 12 market participants including BP, Royal Dutch Shell and Total, launched late last year and is making rapid progress. Around two thirds of all North Sea crude trade is now processed through the VAKT platform, with participants from outside the group of direct backers now signed up for the service. The logic is simple – if the competition is shaving operational costs down through digitalisation and there is no barrier to entry, it’s time to get on board. VAKT is set to transform other highly liquid market areas, with northwest Europe’s ARA barge market and the US crude pipeline space next on its list.
The market for trade-processing, operations and analytics talent is shrinking as companies go through rationalisations and adopt digital processes, but the outlook is not as dark as it may seem. The rise of digital initiatives offering services to the trading sector is creating a new job market with the service providers, which need people with first-hand industry experience. Without such talent, they would be relying on guesswork when choosing exactly how to pitch their offerings to the market. The number of organisations focused on providing the market with post-trade, data and analytics services is rising in line with demand. Companies including Vortexa, Komgo, Kpler and Kayrros are employing or are seeking to employ people with industry backgrounds suited to their offerings.
Talent requirements are shifting in line with industry method and structure, but skills will remain in demand. We are seeing demand from the digital firms for people with specific oil-trade skillsets. This demand will rise as the service providers grow in number and market reach, effectively causing a migration of front, middle-and back-office staff from trading operations to companies offering digital services. The opportunity to offer such services arose because of market participants’ need to create greater efficiencies in a trading environment that has been weighing on margins. The companies that successfully take the opportunity will deliver the industry’s next wave of growth, branching out to deliver offerings appropriate to the age of information.