Credit crunch to keep lid on energy trading

LONDON (Reuters) – Fallout from the credit crisis looks set to keep a lid on activity in over-the-counter trading in energy markets, where liquidity has not recovered nearly six months after the crisis hit.

Volumes overall in over-the-counter oil trades, such as price swaps, used to hedge price risk or simply take a punt on the market, are estimated to be around 20 to 30 percent down.

“OTC liquidity has not recovered,” said one senior executive at a financial services firm. “Some markets have had significant withdrawals, such as the electricity markets.”

Reuters