Russia’s invasion of Ukraine has thrust a once-obscure market into the limelight
pushed for deregulation of Europe’s gas market, moving it from bilateral contracts to trading on exchanges. The Netherlands was first out of the blocks to establish a euro-denominated trading hub, says Mike Fulwood of the Oxford Institute for Energy Studies . This free-market zeal combined with state investment in storage and pipelines to make the Netherlands Europe’s natural-gas hub.. As Europe’s hub, it gathers participants from across the bloc.
Lofty prices increase the cost of failed trades, leaving the clearinghouse, which is responsible for settling deals, on the hook. So as prices rose, it demanded more “margin”, to be seized if traders cannot make good on the deal. A cycle of such margin calls and nervy traders stepping back may have helped drive up prices over the summer. Governments across Europe have been forced to step in to provide guarantees.
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