European energy and commodity trading company the Vitol Group is assessing the potential of the Japanese electricity trading space, Bloomberg has reported.

The company is exploring the possibility of establishing a domestic office in Tokyo to engage in physical electricity trading but has not yet finalised strategies or timelines.

It refused to comment on the matter when approached.

Since Japan liberalised its power market in 2016, it has seen an influx of foreign companies attracted by the market’s growth and increased volatility.

This volatility has been driven by factors such as the global shift away from fossil fuels, the impact of extreme weather conditions and the restarting of nuclear facilities.

Companies such as BP and Engie both established power trading desks in Tokyo in 2023.

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The European Energy Exchange, which hosts power derivatives, reported a significant surge in the trading volume of Japanese power derivatives.

In January 2024, the volume rose a remarkable 357% compared with the same month of 2023.

Vitol, a major independent oil trader globally, has been involved in global power markets for more than ten years but along with others has come under scrutiny in the UK for trading strategies linked to rising energy prices.

In Japan, any company wishing to operate a power retail business or participate in the physical electricity market must secure a permit from the trade ministry.

Power futures contracts, however, do not need such government approvals and can be managed from abroad without significant regulatory hurdles. The company is already active in trading Japan power futures, conducting these operations from its Singapore office.