According to a Reuters report on Monday, large commodity Trading Houses are being told to deposit hundreds of millions of dollars in extra capital to offset their exposure to rising gas prices. Seven unidentified sources told the news agency that commodity dealers Glencore, Gunvor, Trafigura, and Vitol, among others, are facing margin calls on their natural gas investments. A margin call occurs when account funds fall below the minimum margin requirement, which is 10% to 15%, according to Reuters.
According to two sources, Trading Houses and other parties have amassed a total of $30 billion in short positions in the Dutch TTF gas market, with European utilities taking the long opposite side. The primary platform for constructing a temporary job in gas futures is the Dutch TTF gas trading hub. By establishing long-term contracts to acquire liquefied natural gas cargoes, trading firms have placed large wagers on natural gas produced and exported from the United States (LNG). The arrangements are primarily for gas export to Europe and Asia, with some contracts running until 2041.
Traders must sell short positions in the European and Asian gas futures markets to hedge against price disparities between physical gas in the US now and the rest of the globe in the future. Traders establish short positions by selling a gas futures contract to repurchase it at a lower price later. However, according to Reuters, the tactic failed last month when European gas prices rose due to several reasons, including low stockpiles and increasing demand in Asia. Since January, the front-month Dutch TTF gas contract, a European benchmark, has risen by roughly 400 percent.