December 2016: Recap on 2016, broker bilateral share continues to fall driven by Gas and Power, spotlight on Power markets.
Now the year has drawn to a close, let's recap on some key themes seen throughout 2016. The Coal market showed a significant shift away from broker cleared; starting the year at 97% market share and ending it at 72% with exchange execution being the main benefactor. TTF took the crown from NBP as king of European gas, ending 2016 with 118% of NBP volumes. The Power markets saw their share of action, as supply concerns and colder weather led prices to spike in the second half of 2016. Volumes responded to this volatility, up 28% vs. 2015 in the last quarter.
December 2016 saw total market volumes drop 27% vs. November 2016, to 5.92 million monthly contracts. All commodity groupings except Emissions (up 8% MoM) were affected by December's seasonal drop in volume traded. Coal was the hardest hit, down 56% to 129k monthly contracts while both UK and Euro Power were down 35% and 38% respectively. Total market volumes for 2016 were up 15% vs. 2015, to 89.2 million monthly contracts. UK gas saw the only volume decline vs. 2015, dropping 3.1%. Conversely UK Power saw the largest volume increase, jumping 34% over 2015 to 2.1 million monthly contracts.
The trend toward broker bilateral seen earlier this year continued to reverse this month, as broker bilateral dropped a further 4% MoM to 53% market share, its lowest since April 2016. Exchange executed saw most of the additional market share, increasing 3% over November while broker cleared saw a 1% MoM increase. Once again the large relative size of Euro Gas has made them the main driver for the shift, with a 2% drop in broker bilateral market share. Meanwhile, Euro Power saw the largest percentage MoM shift as broker bilateral declined 6%.
This Power commodity groupings used in this report are UK Power and Euro Power, which is made up of German Power, French Power, Nordic Power, Italian Power, Spanish Power and CEE Power. Chart 1 in the download below compares German power to all other Power commodities included in this report. The chart highlights the dominance of German Power volume consistently accounting for over 50% of total Power volume in 2016. Total Power volume traded in 2016 was up 21% vs. 2015 to 13.8 million MWh German Power accounting for 66% of that growth.
Chart 2 in the download below looks at the performance of all Power commodities excluding German Power. Looking at the chart it is clear that volume volatility in 2016 was significantly higher than 2015. 2016 saw Spanish, CEE and UK Power all increased their market share vs. 2015 due to a solid volume growth of 31%, 24% and 34% respectively. Italian Power was the only power commodity to show a decline in annual volumes dropping 5.9% vs. 2015 and resulting in their market share slipping 3% to 12% for 2016. December saw a 12% YoY decline in volume once German Power is removed. This is largely due to Italian and Nordic power who saw 35% and 18% decline respectively outweighing UK and CEE power YoY volume increase of 16% and 4% respectively.
Chart 3 in the download below shows the front month price movement of the various baseload power contracts. There is a visible correlation between all the baseload prices which intensifies between January 2016 and August 2016. This correlation clearly weakens towards the end of the year with supply concerns in French Power leading to prices sky rocketing to a peak of €98.22/MWh in October 2016.