Page 10 - FSUOGM Week 40 2021

FSUOGM PERFORMANCE FSUOGM

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-
At TTF alone, traders commodity traders being told by brokers and viding a greater opportunity for traders. Around
have built up $30bn of exchanges to deposit hundreds of millions of 45% of Gunvor’s hedging positions – totalling
short positions. dollars in extra funds to cover their exposure $5.3bn in June – are related to gas and LNG,
to record-high gas prices, Reuters reported on according to Reuters.
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
borrowing and have less cash left to trade with, the 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. ™
ENERGY TRANSITION
Equinor, Rosneft to work together

on decarbonisation

RUSSIA RUSSIA’S Rosneft and Norway’s Equinor have reduction, energy efficiency and the reporting of
agreed to work together to decarbonise their greenhouse gas emissions. They will also look at
Rosneft wants to operations, the companies said on September 29. opportunities in the fields of renewables, carbon
improve its ESG score Environmental, social and governance (ESG) capture utilisation and storage and low-carbon
and Equinor wants ratings have been an increasing source of con- hydrogen.
to ensure its low-cost cern for investors, and Rosneft and other Russian “Equinor aims to proactively support emis-
Russian barrels can oil companies have responded by taking steps to sions reductions wherever we invest based on our
remain in its portfolio. reduce their emissions and invest in low-carbon decades of experience from Norway,” Equinor’s
technologies. To help in this pursuit, they have vice president for international upstream oper-
reached out to their international partners, who ations, Al Cook, commented. “We are happy to
are anxious to decarbonise their profitable Rus- work together with Rosneft and share best prac-
sian projects to ensure they can remain part of tices to address climate change.”
their portfolios even as they move towards net- Equinor is targeting cuts of 40% and 70% to
zero goals. its emissions by 2030 and 2040 respectively, and
Under an initial deal, Equinor and Rosneft wants to bring them to close to zero by 2050. Ros-
will team up to develop low-carbon solutions neft’s own targets are not as ambitious, although it
and reduce the carbon footprint of their joint has formed several decarbonisation partnerships
projects. The pair work together at the North over the past year. In February, it formed a pact
Komsomolskoye viscous oilfield in Western with BP, one of its shareholders and its partner at a
Siberia, as well as at the Domanik tight oil play number of major upstream projects.
in the Volga-Urals. Equinor is also exploring 12 Like Equinor, BP is reluctant to part with
licences in Eastern Siberia with Rosneft. its low-cost Russian production, even it has set
In addition, the pair will share knowledge some of the most ambitious climate targets in the
in areas such as flaring and methane emission industry. ™

P10 www. NEWSBASE .com Week 40 06•October•2021