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Vitol urges regulators to maintain ‘integrity’ of financial markets

The world’s largest independent oil trader has called on regulators to maintain the “integrity” of the financial markets underlying global commodity transactions.

In its annual statement of results, Vitol said policymakers should consider “market integrity and liquidity” in futures exchanges, which are used by the industry to manage price risks.

“Last year the gas and electricity markets experienced unprecedented levels of volatility, examining the resilience of the markets and their participants,” the privately held company said. “For us, this period underscores the need for regulators to consider market integrity and liquidity in times of severe pressure.”

The comments from Vitol reflect the concern felt by commodity traders, who have faced huge cash demands to cover hedging positions.

This month, Europe’s major energy traders asked governments and central banks to do so Provide “emergency” assistance. To avoid a potential cash shortage when sharp price moves triggered by Russia’s invasion of Ukraine are putting pressure on markets.

In a letter seen by the Financial Times last week, the European Federation of Energy Traders – a trading body that lists Vitol, Trafigura and oil companies BP and Shell as members – said the industry needed “time-limited emergency liquidity support to ensure wholesale gas and power markets continued to function” .

The fluctuations in the commodity markets since the invasion of Ukraine were the sharpest in nickel, a major Russian export; Oil and gas prices, in which Russia plays a key role, have also skyrocketed since the start of the war.

Stock exchanges play a vital role in global commodity markets in providing futures trading with risk management contracts. Without these devices, most merchants would not be able to move physical goods.

This makes margin requirements – or more cash requirements – and clearance restrictions on futures contracts critical to global oil and gas flows.

In its annual report, published last Wednesday, Glencore, one of the world’s largest commodity traders, highlighted the ‘ability to finance marginal payments’ as one of the risks facing the industry.

Demands for more cash to cover short hedge positions soared earlier in March, when commodity prices escalated following Moscow’s penetration of Ukraine, forcing some traders to cancel the positions.

The lack of hedging activity is already being felt in the futures markets. Combined open interest – the number of futures contracts that have not been closed or delivered – in major crude contracts and refined products has reached its lowest level in seven years.

An index of liquidity in Brent, the international oil marker, followed by traders, has also dropped to levels not seen for many years, increasing volatility.

In its statement of results, Vitol said it traded 7.6 million barrels of oil per day for the year to December, with revenues soaring 50 percent to nearly $ 280 billion.

It did not reveal a profit figure, but last year rival traders Trafigura and Glencore recorded record profits as they disrupted supply disruptions and increased demand with relief in lock frames.

Vitol also increased liquefied natural gas trading to 12.9 million tonnes, while electricity and gas volumes jumped 30%.

“Energy markets have responded to political events in the near term through volatility. In the longer term trade flows will adjust, but prices are expected to remain high for some time,” said Russell Hardy, Vital’s CEO.

Brent crude traded up 6 percent Monday to $ 114.5 a barrel. It closed close to $ 130 earlier this month as traders scanned the market for alternatives to Russian oil.

Vitol urges regulators to maintain ‘integrity’ of financial markets Source link Vitol urges regulators to maintain ‘integrity’ of financial markets

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