Page 9 - EurOil Week 41 2021

EurOil PERFORMANCE EurOil

Commodity traders reportedly face

margin calls amid gas price spike

EUROPE THE global gas supply crisis looks set to take a – a sector that has rapidly expanded in volumes
further turn for the worse, with the world’s top in recent years and gained greater liquidity, pro-
Gunvor, Glencore, commodity traders being told by brokers and viding a greater opportunity for traders. Around
Trafigura and Vitol are exchanges to deposit hundreds of millions of 45% of Gunvor’s hedging positions – totalling
reportedly among the dollars in extra funds to cover their exposure $5.3bn in June – are related to gas and LNG,
traders facing margin to record-high gas prices, Reuters reported on according to Reuters.
calls. October 4. In particular, trading firms have placed their
Citing sources, the news agency said that bets on US LNG. To hedge against price differ-
Glencore, Gunvor, Trafigura and Vitol were ences between physical gas in the US now and
among the traders facing these margin calls on the rest of the world in the future, traders need
their financial positions in natural gas markets. to sell short positions in the European and Asian
This will mean the traders will have to tie up gas futures markets. A short position is when a
more of their capital to these deals, and some trader sells a gas futures contract with the inten-
of the smaller firms will have to increase their tion of buying it back later, when it anticipates the
borrowing and have less cash left to trade with, price will be lower.
undermining their profits. However, natural gas prices have gone from
Many of the traders declined to comment on strength to strength in recent months – a time
the report. Gunvor told Reuters that while there of year when markets are typically subdued. In
have been margin calls associated with the Euro- Europe, the November delivery contract at the
pean natural gas price rally, Gunvor maintains Dutch TTF hub surged to a new record on Octo-
“a healthy liquidity position and instruments to ber 5 of $1,300 per 1,000 cubic metres.
manage any further volatility.” At TTF alone, sources told Reuters that trad-
Many of the world’s leading traders have ing houses and other players had together accu-
increased their exposure to LNG in recent years mulated $30bn worth of short positions. ™

Week 41 14•October•2021 www. NEWSBASE .com P9