As a deepening panic has swept across world energy markets in recent months, exchange operators have reaped benefits as trading volumes soared.
The two largest commodity exchanges, CME Group and Intercontinental Exchange, saw crude oil volumes jump some 40% and 14% respectively in 2015, recent data showed.
Turnover in their flagship oil contracts surged further to record highs in January, according to data released this week, as whipsawing prices spurred a surge in interest from retail and speculative investors.
The bumper volumes will likely be a hot topic of discussion when Atlanta-based ICE reports quarterly earnings yesterday and its Chicago rival releases its numbers today.
The bonanza in energy products may help cushion slower turnover growth in interest rate contracts, the most actively traded products at both exchanges.
Turnover typically picks up during major market booms or busts, but a surge in turnover in some of the exchanges’ biggest contracts by liquidity and volume illustrates growing worries among investors that the crude supply glut could last longer.
“We’ve seen people piling in and getting out. The exit and entry has elevated trading volumes,” said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut.
The wild prices have also drawn greater interest from retail and fund investors, analysts said.
In January, ICE’s Brent contract saw just over 23mn futures and options traded in the month, up 45% from December and almost a quarter from a year ago. That exceeded the previous monthly record set in January 2015 by over 4.5mn contracts. Some 26.2mn contracts of CME’s US WTI crude contract, equivalent to 26.2bn barrels of oil, changed hands last month, up almost 30% from a year ago and a jump of nearly a quarter from December. Based on January numbers, Richard Repetto, an analyst at Sandler O’Neill & Partners, said CME’s energy volumes are running at more than 30% above his annual estimate and ICE at 15% ahead of his forecast.
Other energy products also fared well from the rout. Futures and options volumes in CME’s gasoline contract rose 10% from last year to 3.4mn contracts, the highest for a January since at least 2008.
ICE’s European natural gas futures contract hit a record above 2.1mn in the month, up almost a third from January 2015.
The energy boon is in marked contrast to other financial instruments. On Wednesday, exchange operator CBOE Holdings reported stronger-than-expected quarterly earnings, but operating revenue dropped due to a decline in transaction fees and trading volume.
“Obviously, oil has been getting even more attention than usual these days, and many believe there is major opportunity as a potential bottom has been reached – or, at least, may be within sight,” said Peter Donovan, broker at Liquidity Energy.
For crude oil investors, January was wild. A fresh sell-off led by nervous investors accelerated declines in the first weeks of January, leading to US prices crashing below $27 per barrel on January 20 for the first time since 2003, as traders worried about once of the biggest supply gluts in history.
By the end of the month, they had bounced back, surging more than 25% from those 12-year lows on hopes of a deal between major exporters to cut output.
Some 26.2mn contracts of Chicago Mercantile Exchange’s US crude contract, equivalent to 26.2bn barrels of oil, changed hands last month, up almost 30% from a year ago and a jump of nearly a quarter from December.
