houstonsemipro Posted March 3, 2005 Share Posted March 3, 2005 March 3, 2005, 12:47AMEmbers of energy trading heating upThe energy trading business that so defined Houston's image in the late 1990s is making a comeback, fueled by high prices, new investors and new players.By TOM FOWLERCopyright 2005 Houston ChronicleThe energy trading business that so defined Houston's image in the late 1990s is making a comeback, fueled by high prices, new investors and new players.One sign of this change is Citigroup's plans to open a sizable energy trading business in Houston. Officials with the financial giant won't comment, but sources indicate the dozen or so employees in a northwest Houston office will move downtown shortly. The operation could expand to as many as 100 traders in coming years.Once dominated by energy companies like Enron and Dynegy, the new energy trading industry is now driven by a few energy giants, like BP and ChevronTexaco, and more recently by banks like Merrill Lynch and Morgan Stanley. The banks are attracted by predictions that energy trading could grow tenfold in the coming years.Even with record prices and growing energy demand, those predictions may look wildly optimistic.But Peter Fusaro, chairman of New York energy consulting firm Global Changes Associates, notes that for many long-traded commodities, the dollar volume is between six and 20 times the value of the volume of the actual commodity.This is possible because there are so many ways for traders to speculate on price fluctuations without ever owning the underlying commodity, which is known as the physical market. In the United States, the trading volume for energy is about $2 trillion per year, or half of the dollar value of the physical market. That spells a huge upside potential, Fusaro said."The next five years could be huge in energy trading," Fusaro said.In the late 1990s, companies such as Dynegy, El Paso, Enron and Reliant Energy employed hundreds of traders who helped the fragmented energy industry manage risk. This started out as a way for these merchant energy companies to buy fuels for their power plants and pipelines and sell the output.Later, that intimate knowledge of the physical markets, combined with the increasing sophistication of financial tools, led the companies to more speculative trades that didn't involve the delivery of energy.Some hangers-onWhen Enron went bankrupt in late 2001 and shuttered its massive Enron Online marketplace, it removed one of the largest players from the business. Revelations about Enron's practices undermined the credibility Quote Link to comment Share on other sites More sharing options...
LTAWACS Posted March 4, 2005 Share Posted March 4, 2005 Sounds like i should get my resume ready Quote Link to comment Share on other sites More sharing options...
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