Banks scramble to cash in on crude

INVESTMENT banks are scrambling to cash in on spiralling oil prices by moving into the lucrative energy trading and derivatives business.

Newcomers such as ABN Amro, Dresdner Kleinwort Wasserstein and Calyon, a division of Credit Agricole, are setting up trading desks in a bid to profit from oil's surge.

Others are expanding their existing operations aggressively. Barclays Capital plans to have more than 100 traders by the end of the year, up from fewer than 50 three years ago, and is moving into the US power market. Deutsche Bank has doubled its headcount to 100 in the past two-and-a-half years.

Merrill Lynch, which sold its energy-trading division in 2001, intends to get back into the business, describing commodities as a 'missing piece in the jigsaw'.

Some banks trade oil, gas, power and other commodities on their own account, but their main role is to use financial instruments to enable companies such as oil producers, utilities and airlines to lock in prices. British Airways recently revealed it has hedged 72% of its fuel costs up to next March.