Derivatives house of the year: Macquarie Group

From a risk perspective, 2024 was a relatively quiet year for commodities. Despite continued geopolitical tensions, volatility in most commodity markets, except metals, fell significantly from the high levels of the previous two years.

Realised volatility on front futures West Texas Intermediate crude oil fell from 48% in 2022 to 29% in 2024, according to CME data, while natural gas dropped from 98.5% in 2022 to 77% in 2024. Agricultural showed a similar picture, with volatility on front futures wheat, for example, dropping to 26.6% in 2024 from 51% in 2022.

For both producers and consumers, the lack of movement bred some complacency in terms of hedging.

“If you have the type of business that relies on sitting back and waiting for the phone to ring because there’s a big move in the market, you wouldn’t have had a great year,” says Benjamin Davis, co-head of global oil in the commodities and global markets business at Macquarie Group.

The bank’s success, he believes, was based on Macquarie’s deep commodity markets expertise. The oil team, for example, was able to provide insights that could spur action. “We have a team of experts … who are looking at yields on US supply rigs. That’s how much detail we go into. And, if you want to understand what’s happening in US supply – which is pretty much the marginal supplier in oil – then Macquarie is probably the expert in that,” Davis says. 

“We were speaking to clients saying, look, there’s macro risk. There could be a blow up. These are the structures that might be interesting for you in case our balances turn out to be correct,” he says. “Having these detailed conversations was absolutely key to getting clients to do business with us.”

Last year, much of that hedging involved Macquarie selling collars to provide disaster insurance. “If you’re worried about something that’s going to move the market $20 a barrel (/bbl), paying $1–2/bbl equivalent was getting clients some very attractive collars.”

But while the main trade indexes might not have moved much in 2024, there was activity in some other more niche markets. “Whether it’s plastics, petrochemicals, or resins in the energy space, or fats, proteins etc. in the ag space, these products have their own stories,” says Selim Batibay, head of commodity sales, Americas, in Macquarie’s commodities and global markets business. “Some of these were quite volatile last year.”

Much of Macquarie’s success in commodities is due to the breadth of its coverage, and its ability to offer products and manage risk in such niche markets, many of which are highly illiquid, says Batibay.

He cites the nascent market in recycled polyethylene terephthalate (r-PET). A growing number of Macquarie’s corporate clients have signalled plans to shift to r-PET as part of their sustainability commitments, and indexes have emerged to track pricing. Macquarie has transacted what it says is the first financial hedge in the plastics feedstock, for a US client.

The firm was able to offer that product based on its analysis of anticipated future demand and the correlation of the r-PET price with virgin PET and a number of other commodities. “It comes down to having multi-decade experience as an organisation in managing and warehousing illiquid risk,” Batibay says.

Davis also notes success in helping clients hedge full refinery margins, capturing not only the gasoil crack spread but also those of more marginal inputs, such as carbon allowances, Renewable Identification Numbers in the US, and soybean prices. “Our systems are sufficiently flexible to match exactly what the client wants,” he says, enabling them to lock in the exact margin. “We’ve built up a book that enables us to manage that risk rather than have to back it out.” 

The bank’s knowledge around the illiquid products space sets it apart, he adds. “If we were just offering standardised products that most of our competitors are offering, we wouldn’t be where we are today.”

In oil, however, Davis notes that 2025 has started strongly for hedging. “Coming into April [when President Trump’s tariffs tipped Brent from $75/bbl to below $63/bbl almost overnight], most producers and consumers were a bit underhedged,” he says. “When the market came off this year, we had some really strong consumer flows on the back of that. I’m quite excited at the prospect of a bit more volatility, whether that’s to the upside or the downside,” he says.