Low volatility in European natural gas and power markets, combined with tougher EU financial regulation, has severely diminished trading's appeal to many banks.
In recent months, corporations including Barclays, JP Morgan and Merrill Lynch have radically scaled down or shut down completely on their gas and liquefied natural gas (LNG) trading activities.
However, many in the sector believe the retrenchment by so many banks provides many opportunities for Europe's key utilities, as well as smaller, more dynamic trading houses, to fill this space and reinvigorate the market.
LNG supply and demand
As Europe's gas markets continue to be impacted by the growth of Asian markets, and more entwined in the globalisation of LNG supply and demand, leading aggregators and suppliers of gas are driving fluidity and new opportunities in trading that European players cannot ignore.
The knock-on effects of new LNG supply and growing LNG demand in Asia will, ultimately, affect the prices paid and the contractual clauses agreed back in Europe - and likely impact on much-needed investment into European infrastructure.
However, while the majority of key players are opting to get out of the market, Citigroup is not scaling back, having recently expanded its European gas and power trading desk.
David Brookes, Head of EMEA Gas Trading at Citigroup Global Commodities, commented: "Citi's major assets are its clients, and in the current market environment we see their risk management needs increasing across European Gas Markets."
The question remains: can the smaller trading houses and utility companies share enough of the pie, alongside banking corporations such as Citi, to ensure the gas trading market in Europe keeps the industry buoyant and attractive to investment?
The 29th annual European Autumn Gas Conference will bring together many of the new players in this LNG space, taking place in London this October. The event will dedicate a day to the interests of senior professionals working in the procurement and trading of gas with a ‘Trader's & Originator's Networking Forum’, providing an opportunity to gauge exactly where European gas and LNG trading is headed.
Adapted from press release by Katie Woodward
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/06082014/banks-are-scaling-down-on-lng-trading-1157/