Market disruption may have opened up arbitrage possibilities, but any such trading seems to have been limited in scale. “I don’t think people have been in the mood to exploit any arbing opportunities. The markets have been very orderly,” claimed the London-based head of commodities at a European bank, who asked to remain anonymous.
So far, markets may have seemed relatively 'orderly' given the circumstances, but this has been a rocky start for Nymex’s new Brent crude futures. Posting a trading volume of 13,000 on its first day – around a quarter of the IPE’s turnover on a similar contract – the new contract’s strong debut on September 5 now seems like it happened a lifetime ago.
Since then, trading volumes for Nymex’s Brent futures have been dwarfed by those posted on the IPE. Last week, the total trading volume for all Brent contracts on the IPE exceeded 100,000 on several days. This is in contrast to Nymex’s Brent contract, where last week, average daily volumes struggled to around 1,000 lots.
In terms of prices, oil has been pulled up and down as each news report brings yet more uncertainty. Brent crude futures had gained around 9% on London’s IPE in the trading days following the attack. But then questions over Organisation of Petroleum Exporting Counties' (OPEC) willingness to relax supply limits had sent futures prices down. But midweek pictures of troop mobilisations in the Middle East saw Brent crude futures up 20 cents to $29.63, and any news hinting at global recession throughout the week tended to pull back oil prices.
Nymex traders in new York have been beset by problems. On the day of the attack, activity was halted, and traders had to either leave their positions exposed, or do their best to hedge on London’s IPE, or elsewhere – taking on basis risk. On Friday of that week, trading on Nymex’s internet-based Access system began – only for the system to be suspended within an hour because of a surge in volumes.
Then as some semblance of normality was returning, traders were again forced to abandon their pits in the middle of last week, as Nymex evacuated due to a bomb scare. Oil traders in New York will be hoping that the new week brings with it more settled times.