Price Volatility and Rising Demand Boost U.S. Natural Gas Trading

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A natural gas-fired power plant is shown in Huntington Beach, California, U.S., June 24, 2021. Picture taken June 24, 2021. REUTERS/Mike Blake

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April 8 (Reuters) – Natural gas trading is enjoying a renaissance in the United States as price volatility returns, while market turmoil in Europe could keep gas demand and exports high for years. years, according to commercial industry executives.

The sharp swings in natural gas prices that can bring huge profits to traders have resurfaced due to severe weather events and the European Union’s search for alternatives to Russian gas imports. Prices on the main gas trading hub in the United States have risen 64% this year, reaching their highest level since 2008.

Investment bank TD Securities said it was bolstering its natural gas trading desk, while fund manager Balyasny Asset Management, pipeline operator Williams Companies and oil refiner Phillips 66 bolstered or expanded trading of gas, according to four people familiar with the matter.

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“A significant driver of this growth is the outsized returns that many of these trading shops have seen in 2021,” said David Byrne, managing director of staffing firm Aurex Group, which serves commodity trading houses and banks. . The Texas freeze in early 2021 caused shortages that generated billions of dollars in profits.

Balyasny recently added traders from BP and Citi to its gas trading team, according to multiple people familiar with the matter and the LinkedIn.com site. Williams, a gas pipeline company, has hired veterans from NextDecade and ConocoPhillips to launch an LNG marketing operation. Read more

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Phillips 66 is setting up a natural gas and power trading desk for its refineries, according to its careers page and LinkedIn.

Phillips 66 confirmed the job offers but declined to comment further on trading. Balyasny and Williams did not respond to requests for comment.

ROLE OF ENERGY TRANSITION

According to industry officials, demand for natural gas, liquefied and renewable natural gases and carbon credits is growing as buyers look to switch to cleaner, renewable fuels.

TD Securities, which trades physical natural gas in Canada, last year named former Repsol gas originator Kylene Isenberg to lead its impending physical natural gas launch in the United States, and Josh Bray as director of physical natural gas trading. He also builds carbon credit groups in North America and Europe.

“We are investing in our energy sales and trading capabilities while committing to providing a comprehensive offering to help our customers make the transition to a low carbon economy,” said David Swinburne, Global Head of raw materials at TD.

Energy marketing firm Vennsmith Carbon has a natural gas office with former Castleton Commodities managers and traders, including Lon Tiemann, former natural gas manager for Castleton and Magesh Nair, who was its chief operating officer until 2019.

“We believe the energy transition will put unique pressures on natural gas markets and lead to a long period of high volatility,” said Ossie Okeke, managing partner at Houston-based Vennsmith.

“Our team has the technology and the experience in building physical and financial platforms to seize the resulting opportunities,” he said.

Element Markets, which trades carbon credits and other environmental products, expanded its renewable natural gas (RNG) trading this year by merging with Bluesource LLC.

RNG, methane derived from vegetable or animal waste, currently represents a small percentage of the total natural gas mix in the United States, but has the potential to represent up to 15% of the total natural gas consumed in the United States, said Element Markets. RNG also sells at a high price compared to natural gas.

The company has doubled the size of its RNG trading business in the past four years and expects to double again in the next two years, Chief Executive Angela Schwarz said in an interview.

Development capital is now being directed to RNG production, helping to overcome current market constraints,” Schwarz said.

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Reporting by Liz Hampton in Denver; Additional reporting by Scott DiSavino in New York; edited by Richard Pullin

Our standards: The Thomson Reuters Trust Principles.

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