European energy trading risks grinding to a halt unless governments extend liquidity to cover margin calls of at least $1.5T, Equinor (NYSE:EQNR) told Bloomberg on Tuesday, as the continent’s energy crisis sucks up capital to guarantee trades amid wild price swings.
The issue is focused on derivatives trading, while the physical market is functioning, Equinor (EQNR) Senior VP Helge Haugane said at the Gastech conference in Milan, adding that the company’s $1.5T estimate to prop up paper trading is “conservative.”
Many companies are finding it increasingly difficult to manage margin calls, which is forcing utilities to secure multi-billion euro credit lines, as rising interest rates add to costs.
“This is just capital that is dead and tied up in margin calls,” Haugane told Bloomberg. “If the companies need to put up that much money, that means liquidity in the market dries up and this is not good for this part of the gas markets,” adding that EU plans to intervene would be “sensible” for derivatives trading.
Among emergency interventions being discussed by the EU are price caps in power and gas markets; Haugane said price caps in electricity could make sense because power markets are more localized, but price caps on gas would be extremely difficult due to the global nature of the market.
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