Earlier this year, the UK’s Financial Stability Board published a report on commodities markets that suggested that certain players in European commodities markets had reduced their hedging of commodities prices last year due to increased margin calls. This was in reference to a decline in open interest in oil and natural gas derivatives markets.
Markets have calmed down recently, but there continue to be short-term spikes. For example, agricultural products spiked in mid-summer and oil and refined products recently crossed the $90/barrel level on news that Russia and Saudi Arabia would extend their voluntary price cuts.
As prices and volatility have decreased, the urgency to implement commodity hedging programmes has declined
Amol Dhargalkar, Chatham Financial
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