Margin calls17 Mar 2022 18:58
From todays Matt Levine 'Money Stuff' email; a warning that without cash aid gas traders may be forced to close positions [as they cannot meet margin calls] which will force prices even higher:
'Europe’s largest energy traders have called on governments and central banks to provide “emergency” assistance to avert a cash crunch as sharp price moves triggered by the Ukraine crisis strain commodity markets.
In a letter seen by the Financial Times, the European Federation of Energy Traders — a trade body that counts BP, Shell and commodity traders Vitol and Trafigura as members — said the industry needed “time-limited emergency liquidity support to ensure that wholesale gas and power markets continued to function”. ...
“Since the end of February 2022, an already challenging situation has worsened and more [European] energy participants are in [a] position where their ability to source additional liquidity is severely reduced or, in some cases, exhausted,” EFET said in its letter, dated March 8 and sent to market participants and regulators.
It was “not infeasible to foresee?.?.?. generally sound and healthy energy companies?.?.?.?unable to access cash”, the letter warned. People familiar with the matter said EFET members had raised the issue with central banks. …
Futures linked to TTF, Europe’s wholesale gas price, surged almost 200 per cent over four days earlier this month. In some cases, variation, or mark-to-market margin, in the gas market have increased 10 times from one day to another.
EFET wants state entities such as the European Investment Bank or central banks, such as the European Central Bank or the Bank of England, to provide support through lenders, to soften the impact of margin calls.
“The overriding objective is to keep an orderly market for futures and other derivative energy contracts open,” said Peter Styles, executive vice-chair of the EFET board, in an interview. “Gas producers, European gas importers ?and power suppliers must retain the opportunity to hedge their positions.”
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