LONDON - The growing number of "data-driven" players such as hedge funds in the world of commodity trading has helped sustain record levels of profit, even as the volatility that supercharged earnings in 2022 has abated, according to a McKinsey analysis.

Trading firms including Trafigura, Vitol, Gunvor and Mercuria have thrived in the extreme market moves that have defined the last few years, from the Covid-19 pandemic to Europe's energy crisis of 2021-2022 and sweeping Western sanctions on Russia for its invasion of Ukraine.

Despite the persisting war in Ukraine and the rise of geopolitical tensions in the Middle East by 2023, that sharp volatility across energy commodities has gradually decreased.

For instance, Vitol - the world's largest independent oil trader and a major player in the liquefied natural gas and power markets - reported a drop of more than 20% in 2023 revenue to $400-billion.

Still, the McKinsey analysis estimated the sector cumulatively raked in about $104 billion in earnings before interest and tax (EBIT) last year, compared to the $99 billion generated in 2022 and well ahead of the $52-billion in 2021.

This increase, despite the fall in prices of key commodities such as oil and gas, was down to rising returns from power trading activities as well as newer entrants in commodity trading who have increasingly embraced technologies like AI, the report suggested.

These so-called 'data-driven' players, including banks and tech-focused traders, have seen their profits rise year by year, particularly in the case of power and gas.

According to McKinsey, the EBIT of about 87% of such data-driven trading companies in Europe exceeded 100-million euros ($108-million) in 2022, while nearly 30% earned more than 1-billion euros. All the players were making less than 100-million euros before 2019.

Commodity houses may be reticent to adopt AI as quickly as banks or hedge funds have, in part due to the many constraints, such as container temperatures, that physical commodities face.

Trading houses, which already control large parts of global oil, gas and power markets, have found it difficult to grow, while poor returns in recent years on wind, solar and hydrogen assets have irked some investors.

Players that embrace new technologies like AI, said McKinsey, "are likely to capture additional value".