ABN Amro delves into global OTC oil and gas derivatives

The new capability will allow ABN Amro to structure risk mitigation products for clients to hedge the negative impact of volatile commodity prices on earnings, Graham Bird, global head of rates markets at the bank told RiskNews. ABN Amro will also develop new commodity-based products for institutional investors looking to diversify investments away from faltering equity and fixed-income markets. ABN Amro already has a well-established energy project finance and lending presence.

Brian de Clare was named global head of commodity derivatives marketing at the bank in London last month, where he reports to Denis McHugh, global head of derivatives marketing. McHugh in turn reports to Bird. De Clare was previously head of commodities at ABN Amro Futures, responsible for energy, metals, soft commodities, structured inventory products and commodity indexation. He is also a member of the London Metals Exchange warehousing committee, the non-financial advisory committee of London International Financial Futures and Options Exchange and the World Bank’s international task force for commodity risk management.

In addition, ABN Amro named Martyn Turner as a senior commodity derivatives marketer to push the drive into gas and oil over-the-counter derivatives. He also transfers from ABN Amro Futures and will be based in London, reporting to de Clare.

De Clare said the bank would offer swaps, put options, call options and collars, as well as more structured products. “We will also offer our clients the opportunity to combine commodity hedges with interest rate and foreign exchange movements,” De Clare said. “This could be used, for example, in a situation where a company wants to purchase fuel in euros, rather than US dollars, which is usually the case, effectively hedging fuel price and foreign exchange risk together rather than through two separate contracts.”

ABN said it has no plans to trade electricity at the moment due to a lack of liquidity, particularly in the European market.