Market Watch: Door Wide Open for New Players as Banks Scale Down Gas Trading in Europe

Low volatility in European natural gas and power markets, coupled with tougher EU financial regulation, has severely diminished trading's appeal to many banks. In recent months, corporations including Barclays, JP Morgan and Merrill Lynch have radically scaled down or even shut up shop altogether on their gas and liquefied natural gas (LNG) trading activities.

But many in the sector believe the retrenchment by so many banks provides many opportunities for Europe's key utilities (owners of most of the union's gas and power assets), as well as smaller, more dynamic trading houses, to step into this void and reinvigorate the market.

As Europe's gas markets continue to be impacted by the growth of Asian markets, and more entwined in the globalisation of LNG supply and demand, leading aggregators and suppliers of gas are driving fluidity and new opportunities in trading that European players cannot ignore. The knock-on effects of new LNG supply and growing LNG demand in Asia will, ultimately, affect the prices paid and the contractual clauses agreed back in Europe - and likely impact on much-needed investment into European infrastructure.
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