Trayport Euro Commodities Report Trayport Analysis Team February 2017
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Editorial summary February 2017: Volumes continue to decline, prices cool off but UK Gas swims against the tide. February picked up January s trend and ran with it as the majority of commodity groups continued MoM and YoY declines in volume. Monthly contracts traded across all commodities totaled 6.674m in February 2017, down 10% from January 2017 and 25% below that of February 2016. The declines in volume were across the board with all commodity groupings seeing both MoM and YoY declines except for UK Gas, who posted an 8% MoM increase in monthly contracts. The color of choice for Power this month is red as there were broad declines across all power markets. German Power was the worst hit with February volumes, down 221 TWh MoM and 123 TWh YoY, the largest decline in both nominal and percentage terms for the group. The declines were not exclusive to the more dominant power regions with Italian, Spanish and CEE power seeing YoY declines of 49%, 64% and 24% respectively. The lower volumes were accompanied by lower prices with double digit declines in front month prices for the majority of the power markets, Nordic Power baseload stood out with only a 1% decline. Table 1: Volume traded for UK, German, Nordic and French power in TWh. Commodity Feb 16 Jan 17 Feb 17 MoM (TWh) YoY (TWh) German Power 588 686 465 221 123 UK Power 147 120 100 21 47 Nordic Power 147 149 130 19 17 French Power 122 59 52 7 71 Total 1,005 1,014 747 267 258 The story is very much the same when it comes to Gas, although there are a few splashing s of black to make the picture a little less monocolored. As mentioned earlier, NBP was the MoM star seeing a jump of 121 TWh in volume traded during February, although still 32% below February 2016 volumes. TTF saw the largest monthly decline, dropping 8% to 1,924 TWh vs. January 2017 but even this was not enough for TTF to lose its crown, posting 107% of NBPs monthly volume. PSV saw only minor increase from January, up 1% each but the story is far less marginal YoY, down 20%. Austrian VTP was the sole gas market to notch a YTD rise, up 8%, 13% of this volume was executed through the exchange, the highest market share recorded (since Jan 11). Table 2: Volume traded for NBP, TTF, NCG and Gaspool in TWh. Commodity Feb 16 Jan 17 Feb 17 MoM (TWh) YoY (TWh) NBP 2,033 1,535 1,656 121 377 TTF 2,178 1,924 1,775 149 403 NCG 209 184 130 54 79 Gaspool 113 85 78 8 35 Total 4,532 3,728 3,638 90 894 The declines continued in the coal markets, with API2 and API4 down 51% and 72% YTD respectively. One does need to consider the high volumes traded in February 2016, even so, both API2 and API4 volumes were considerably lower when compared to January 2017, down 27% and 65% respectively. The Broker Cleared segment lost further ground to Broker Bilateral and Exchange Execution with API2 clearing 64% of trades via Broker Cleared. This figure stood at 94% of the market 12 months ago. ICE held 58% of the cleared coal market up 7% on January while CME held the other 42%. Emissions were no exception to the overall trend, down 17% MoM and down the same percentage YTD. Broker Bilateral continued their push into the emissions market with 19% of all volume, up 1% on January and up 11% since February 2016. High Level Market Summary UK Power volumes down 17% MoM. Market share split 84% broker bilateral / 16% exchange executed. 12.81 TWh of the 15.33 TWh exchange executions were traded via auction, with the remaining 2.52 TWh from continuously traded exchange markets. German Power volumes down 32% MoM. Market share split 61% broker bilateral / 14% broker cleared / 25% exchange executed. French Power volumes down 12% MoM. Market share split 61% broker bilateral / 12% broker cleared / 27% exchange executed. Nordic Power volumes down 12% MoM. Market share split 37% broker cleared / 63% exchange executed. Italian Power volumes down 3% MoM. Market share split 38% broker bilateral / 51% broker cleared / 11% exchange executed. Spanish Power volumes down 35% MoM. Market share split 49% broker bilateral / 44% broker cleared / 7% exchange executed. CEE Power volumes down 17% MoM. Market share split 93% broker bilateral / 7% exchange executed. NBP volumes down 23% YoY. Market share split 41% broker bilateral / 9% broker cleared / 50% exchange executed. 1
TTF volumes down 13% YoY. Market share split 70% broker bilateral / 5% broker cleared / 25% exchange executed. NCG volumes down 29% MoM. Market share split 82% broker bilateral / 18% exchange executed. Gaspool volumes down 9% MoM. Market share split 82% broker bilateral / 18% exchange executed. France Hubs volumes down 1% MoM. Market share split 72% broker bilateral / 1% broker cleared / 27% exchange executed. Austrian VTP volumes down 2% MoM. Market share split 87% broker bilateral / 13% exchange executed. ZEE market share split 99% broker bilateral / 1% exchange executed. PSV volumes up 1% MoM. Market share split 98% broker bilateral / 1% broker cleared / 1% exchange executed. API2 volumes down 27% MoM. Market share split 12% broker bilateral / 64% broker cleared / 24% exchange executed. Cleared market share CME 41% / ICE 59%. API4 volumes down 65% MoM. Market share split 1% broker bilateral / 95% broker cleared / 4% exchange executed. Cleared market share CME 62% / ICE 38%. EUA volumes down 17% MoM. Market share split 18% broker bilateral / 16% broker cleared / 67% exchange executed. CER volumes down 17% MoM. Market share split 89% broker bilateral / 9% broker cleared / 2% exchange executed. 2
European Energy Markets Composition: Broker Bilateral, Broker Cleared and Exchange Execution Table 1: Key Term Definitions Term Definition Calculation Broker Bilateral Total volume executed at a broker and settled bilaterally, without the involvement of a clearinghouse LEBA published total volume minus LEBA published cleared volume Broker Cleared Total volume executed at a broker or off exchange and given up for clearing to a clearinghouse Aggregated clearinghouse reported broker cleared volume Exchange Execution Total volume executed directly on exchange and cleared with the relevant clearinghouse Aggregated exchange reported executed volume Cleared Market Total volume cleared at a clearinghouse Broker cleared plus exchange execution Total Execution Total executed volume, at a broker or an exchange Broker bilateral plus broker cleared plus exchange executed 3
European Energy Markets Composition: YTD Trends Table 2: Volume Traded Change Commodity Class MoM YoY YTD Term Definition Emissions 17% 23% 16% Coal 30% 55% 54% MoM Current month volume versus previous month volume (e.g. October 2012 vs. September 2012) UK Gas +8% 19% 23% Euro Power 26% 27% 19% Euro Gas 26% 21% 15% UK Power 17% 32% 25% YoY YTD Current month volume versus same month last year volume Total volume YTD 2014 versus total volume YTD 2013 (e.g., Jan Oct 2014 vs. Jan Oct 2013) 4
European Energy Markets Composition: Total Euro Commodity Market Volumes (Monthly Contract Equivalents* 000 s) *Monthly Contract Equivalents calculated as total volume divided by a standard monthly contract lot size (30 day month): Commodity Class Volume Unit Standard Monthly Contract Lot Size Monthly Contract Equivalent Calculation Emissions Metric tonnes 1,000 tonnes Total volume in metric tonnes divided by 1,000 tonnes Coal Metric tonnes 1,000 tonnes Total volume in metric tonnes divided by 1,000 tonnes UK Gas Therms / MWh 30,000 therms / 879 MWh Total volume in MWh divided by 879 MWh Euro Power MWh 720 MWh Total volume in MWH divided by 720 MWh UK Power MWh 720 MWh Total volume in MWH divided by 720 MWh Euro Gas MWh 720 MWh Total volume in MWH divided by 720 MWh Monthly Contract Equivalents allow us to compare trading volumes across commodity classes that are traded in different volume units. 5
European Energy Markets Composition: Total Euro Commodity Market Volumes (Monthly Contract Equivalents* 000 s) *Monthly Contract Equivalents calculated as total volume divided by a standard monthly contract lot size (30 day month): 6
European Energy Markets Composition: Rebased Price Trends over Time All prices are Front Month, except EUAs, which are Front Vintage. Prices rebased 24 Months previous 7
Gas Hub Evolution TTF, NBP & Other Gas Other Gas Detail 8
Gas Hub Evolution Gas Market Composition Gas Rebased Price Trends over Time Prices rebased to 1,000 April 2015 9
Power Market Evolution German Power & Other Power Other Power Detail 10
Power Market Evolution Power Market Composition Power Rebased Price Trends over Time 11
Data Sources OTC brokers data LEBA www.leba.org.uk Exchange data APX ENDEX Borsa Italiana S.p.A. CME EEX ICE NASDAQ OMX BMEClearing OMIP CEGH Nord Pool Spot Bluenext Clearing house data LCH Data source Jan 2011 Oct 2013, TTF futures data only; source no longer available http://www.borsaitaliana.it/ http://www.cmegroup.com http://www.eex.com/ www.theice.com www.nasdaqomxcommodities.com http://www.meff.es http://www.omip.pt http://www.cegh.at http://www.nordpoolspot.com Data source Jan 2011 Nov 2012; source no longer available www.lchclearnet.com 12
Trayport Analysis Team Andrew McSherry, CFA Analysis Team Lead Trayport Limited analysisteam@trayport.com (020) 7960 5500 Luis Urbina Data Engineer Trayport Limited analysisteam@trayport.com (020) 7960 5500 David Seager Market and Financial Analyst Trayport Limited analysisteam@trayport.com (020) 7960 5500 Chris Smith Commercial Support Administrator Trayport Limited analysisteam@trayport.com (020) 7960 5500 13