Energy hedging is down but not out
Market conditions will change, bringing liquidity back
To hedge you need three things: a risk you are not prepared to tolerate; a counterparty willing to be paid to take the risk on your behalf; and a chosen venue for negotiating and confirming the hedging transaction. All three have changed dramatically in the energy market in the last five years, with a real impact on the volume of hedging going on in the industry; the question now is how many of the changes are permanent.
One primary cause – the low price of oil – is clearly cyclical rather than
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