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Over the past few months, macro investors have been pulling inflation hedges – especially commodity ETFs – as central banks began hiking rates. The scale of margin calls that we’ve seen from the immense volatility this year has also wiped out a lot of the available cash, especially in gas and power markets. A good metric for market liquidity is aggregate open interest across futures. The oil market is currently at around 60% of its high from the middle of 2021.

Under these circumstances, it's good to have a few different diversified sources of liquidity and keep your mind open to proxies. That could mean hedging with benchmark contracts rather than those at specific delivery points that are better aligned with your exposure – you can close the differential between your hedges and exposures by trading basis swaps, which are often more liquid than fixed price swaps.