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September marks the end of the third quarter and the end of the summer hiatus that traditionally hits the European Energy markets through July and August, and volumes were up almost across the board. Total monthly contracts traded in September hit 5.9 million, up 14% vs. Aug-15. Within this, all commodity groupings except UK Gas saw volumes rise MoM. Emissions saw the largest gain, up 82% MoM, with Euro Power up 36%, UK Power up 29%, Coal up 25% and Euro Gas up 5%. Amidst these increasing volumes at group level, API2 posted a record volume month with 347 million metric tonnes traded, while French Power and Italian Power both recorded their second largest volumes since our records started.
The dynamics of the markets continue to fascinate and intrigue us as there are seemingly random and out-of-season shifts in volumes and market shares. Euro Gas bucked the seasonal trends in 2014 with TTF posting records through summer, due to political instability in Ukraine causing a threat to security of supply from Russia. In 2015 we are seeing something similar in the Coal grouping of API2 and API4. API2 has posted two record volume months – January 2015 saw 322 million metric tonnes traded, while September 2015 broke this by 25 million metric tonnes. Meanwhile, API4 volumes have not seen the same kind of growth (January was API4’s ninth largest volume month, and September the 23rd largest volume month). Price dynamics tend to drive volume in the majority of our markets, with high volumes generally supported by increased volatility in prices and / or large movements of price in one direction. Both API2 and API4 have experienced similar price trends this year, with API2 down 29% YoY and API4 down 24%. What’s driving these record volumes in API2? Is it just a case of liquidity begets liquidity? How is the general macro environment for commodities impacting on API2 and API4 volumes? How much of the difference in API2 and API4 volume is due to the freight spread implied between the prices?
September also saw a shift of market share back to the brokers in most markets. Broker bilateral market share in UK Gas grew 7% vs. August; the share of the Euro Power brokered market increased 6% vs. August - 5% broker bilateral and 1% broker cleared; and the Emissions market saw the largest shift across all groupings, with broker cleared volumes gaining 27% market share vs. August 2015. These shifts were all at the expense of exchange executions. These shifts, happening during a month of increasing volumes, test the theory we have often written about – that the exchanges grow in periods of increasing liquidity. Euro Gas was the only grouping that recorded an increase in the cleared market, gaining 1% vs. Aug-15. This move was driven by PEGAS’s exchange execution growth in NCG, Gaspool and the French Hubs, as the TTF cleared market was stable at 29%.
TTF volumes were up 8% MoM. TTF has been nipping at the heels of NBP in terms of total market volumes for a while now, and NBP volumes were down 1% MoM. Given this, TTF managed to grow to 97% of September NBP volumes. This is the highest proportion of NBP from TTF since our records began, and up 8% vs. August’s 89%.
High Level Market Summary
- NCG, Gaspool, the French Hubs and PSV volumes were all down MoM (3%, 11%, 16%, and 4% respectively). The first three hubs saw an increase in the cleared market while PSV saw a shift back to the brokers, after recording the highest cleared market volumes in August.
- ZEE volumes were up 55% MoM. This market continues to be 100% broker bilaterally traded.
- German Power volumes were up 33% MoM. Broker bilateral share gained 5% vs. August, with the cleared market dropping back to 34%. Nasdaq volumes grew 25% MoM, and are up 178% YTD 15 vs. YTD 14.
- French and Italian Power volumes were up 68% and 101% MoM, to the second largest volume since records began. The French Power cleared market lost 1% market share to broker bilateral, while the Italian Power cleared market gained 9% share vs. August.
- Nordic Power volumes grew 9% MoM. EEX has recorded volume in Nordic Power since July. The market remains 100% cleared, with broker cleared gaining 5% share this month.
- Spanish Power volumes grew 55% MoM. Despite this YTD 15 vs. YTD 14 volumes are still tracking down 43%. The cleared market grew by 20% this month as all three clearing venues recorded significant MoM volume increases.
- CME held 85% of the total cleared API2 & API4 market this month, down 2% vs. August.
NB: Total market volumes reported in this report exclude exchange traded spot market volumes. We expect to include exchange traded spot market volumes in our total volume figures in the next couple of months
