Trayport Euro Commodities Report

Trayport Euro Commodities Report Trayport Analysis Team July 2017

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Editorial summary July 2017: Gas Market volume growth stalls, German Power extends MoM decline. July 2017 produced the lowest monthly volumes since August 2015 with 5.715m contract traded. Individual market growth was hard to find with only UK Power, Austrian VTP and EUA providing any MoM volume growth. Euro Gas was responsible for the majority of the MoM decline with UK Gas and Euro Power also lower, dragging total volume down 11% compared to June 2017 levels. Despite the MoM decline, the 2017 YTD total contracts traded deficit narrowed to 13% vs YTD 2016 in line with the seasonality of market volumes. July and August have historically been the lowest trading volume months and it looks like history may repeat itself in 2017. Contra to the last 3 months, gas markets were lower in July with MoM declines across the board led by the dominant TTF and NBP markets down 12% and 14% respectively. Austrian VTP was the only exception, which was up 36% and is the sole gas market to provide growth YTD. TTF extended leadership over NBP with 108% of NBP volumes in July. The Broker Bilateral market gave back the NBP market share it gained in June settling with 38% of the contracts traded, while the Exchange Executed market increased its NBP market share. The Exchange Executed segment held 42% of the NBP market in July 2016, 12 months later, this has increased to 54% with volumes increasing by 6% despite weaker YTD total NBP volumes. Elsewhere in the Gas markets, Exchange Executed gained market share in TTF (up 1% MoM to 28%), PEG (up 4% MoM to 28%) and Gaspool (up 0.3% MoM to 11%). Despite the relatively small MoM increases, the overall trend of a shift to exchanges is difficult to ignore. The German Power market ended July in a similar fashion to June, lower volumes across all metrics: down 9% MoM, down 9% YTD and down 14% YoY. The Broker Bilateral market gained a further 1% market share of German Power to settle at 70% of volume; the highest percentage it has held since May 14. German Power Broker Bilateral volumes are marginal above 2016 levels and as mentioned last month all the weakness in volumes continue to stem from Broker Cleared and Exchange Executed segments. The two most active Exchanges in the German Power market, EEX and Nasdaq OMX, have both recorded lower volumes over the last 3 months. The question remains, is the recent German Austrian Zone split responsible for the lower Broker Cleared and Exchange Executed volumes? The French and Nordic Power markets were down 31% and 19% MoM respectively and both markets experienced a shift towards Exchange Executed. Exchange Executed market share grew by 8% in the Nordic market and 4% in the French market however, the long term market split pattern is sideways at best with no clear trend forming in either market. Elsewhere, UK Power grew volume by 4% MoM, 3% YoY but continues to be down 21% YTD. The Coal Cleared market competition between ICE and CME continues to heat up with ICE gaining a further 2% market share in July. ICE now holds 66% of the Cleared market and has increased API2 and API4 YTD Exchange Executed volumes by over 100% and 500% respectively. The Exchange Executed segment of the API2 market gained a further 3% to settle on 28% of the monthly volume and has now grown 9% since July 2016. However, this is the only segment of the coal market that has shown any sign of growth with API2 and API4 volumes down a further 12% and 11% MoM. 2017 YTD levels continue to be in the red, API2 down 55% and API4 63% and pending a significant event 2017 volumes should lag 2016 levels for the remainder of the year. UK Power volumes up 4% MoM. Market share split 84% broker bilateral / 15% exchange executed (13.46 TWh of the 14.67 TWh exchange executions were traded via auction, with the remaining 1.21 TWh from continuously traded exchange markets) / 2% Broker Cleared. German Power volumes down 9% MoM. Market share split 68% broker bilateral / 12% broker cleared / 20% exchange executed. French Power volumes down 19% MoM. Market share split 66% broker bilateral / 11% broker cleared / 23% exchange executed. Nordic Power volumes down 31% MoM. Market share split 33% broker cleared / 67% exchange executed. Italian Power volumes down 30% MoM. Market share split 22% broker bilateral / 65% broker cleared / 13% exchange executed. Spanish Power volumes down 46% MoM. Market share split 23% broker bilateral / 68% broker cleared / 9% exchange executed. CEE Power volumes down 18% MoM. Market share split 66% broker bilateral / 34% exchange executed. NBP volumes down 14% MoM. Market share split 38% broker bilateral / 8% broker cleared / 54% exchange executed. TTF volumes down 12% MoM. Market share split 65% broker bilateral / 7% broker cleared / 28% exchange executed. NCG volumes down 8% MoM. Market share split 89% broker bilateral / 11% exchange executed. Gaspool volumes down 5% MoM. Market share split 88% broker bilateral / 1% broker cleared / 11% exchange executed. France Hubs volumes down 19% MoM. Market share split 71% broker bilateral / 1% Broker Cleared / 28% exchange executed. Austrian VTP volumes up 36% MoM. Market share split 83% broker bilateral / 17% exchange executed. ZEE volumes down 36% MoM. Market share split 100% broker bilateral. PSV volumes down 18% MoM. Market share split 97% broker bilateral / 1% broker cleared / 2% exchange executed. API2 volumes down 55% YoY. Market share split 0% broker bilateral / 72% broker cleared / 28% exchange executed. Cleared market share CME 33% / ICE 67%. API4 volumes down 63% YoY. Market share split 0% broker bilateral / 83% broker cleared / 17% exchange executed. Cleared market share CME 38% / ICE 62%. EUA volumes up 5% MoM. Market share split 4% broker bilateral / 24% broker cleared / 72% exchange executed. CER volumes down 28% MoM. Market share split 88% broker bilateral / 7% broker cleared / 5% exchange executed 1

European Energy Markets Composition: Broker Bilateral, Broker Cleared and Exchange Execution Note: Data sources on page 11. 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 2

European Energy Markets Composition: YTD Trends Table 2: Volume Traded Change Commodity Class MoM YoY YTD Term Definition Emissions 5% 8% 9% Coal 12% 50% 56% MoM Current month volume versus previous month volume (e.g. October 2012 vs. September 2012) UK Gas 14% 6% 14% Euro Power 16% 12% 17% Euro Gas 11% 1% 8% UK Power 4% 3% 21% Note: Data sources on page 11. 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) 3

European Energy Markets Composition: Total Euro Commodity Market Volumes (Monthly Contract Equivalents* 000 s) Note: Data sources on page 11. *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. 4

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 Note: Data sources on page 11. 6

Gas Hub Evolution NBP, TTF & Other Gas Chart Other Gas Chart 7

Broker Bilateral / Broker Cleared / Exchange Executed chart Price Indexation Chart 8

Power Market Evolution German Power & Other Power Chart Other Power Chart 9

Broker Bilateral / Broker Cleared / Exchange Executed chart Price Indexation Chart 10

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 PolPx GME Bluenext 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 Terms of use of PolPX data are available on http://www.tge.pl http://www.mercatoelettrico.org Data source Jan 2011 Nov 2012; source no longer available Clearing house data LCH www.lchclearnet.com 11