January 2018: Volumes up with mixed segment performance; Euro Gas second largest month since records start; broker bilateral gains in five of six commodity groupings
Volume growth in the Euro Commodities markets in January 2018 was mixed. Total volumes grew 2% YTD 2018 vs. YTD 2017, to 7.67 million monthly contracts traded. Euro Gas and Emissions were positive contributors to this growth, up 17% and 3% YTD 2018 vs. YTD 2017. The remaining four commodity groupings all posted YTD declines in volume, with Coal down 38%, UK Power down 31%, UK Gas down 9% and Euro Power down 6%. This reflects the decline in volume seen throughout 2017, as volumes were all up vs. December 2017 bar Emissions.
The implementation of MiFID II on 3 January 2018 was a key event for the Euro Commodities markets. We have been keeping a keen eye on developments in this area, and have been interested in how this might play out. This month we have seen the broker bilateral market gain market share vs. December 2017 in five of the commodity groupings included in the report: Emissions, up 4%; UK Gas, up 2%; Euro Power, up 4%; Euro Gas, up 5%; and UK Power, up 2%. Are these changes reflective of MiFID II regulation affecting behaviour in the Euro Commodities markets? This movement goes against the traditional expectation that the cleared market gains more with increasing volumes – volumes were up MoM but the bilateral market benefited the most from this increase in liquidity.
As stated above, Euro Gas posted its second largest volume since January 2014. Five out of the seven regional markets included in the grouping recorded volumes in the top ten volumes since our records start. TTF posted its second largest month ever with 2,250 TWh traded, at 162% of NBP and up 24% MoM and 17% YoY. Announcements regarding further production cuts at Groningen following further earthquakes throughout the month may have impacted TTF trading. The remaining markets that saw top ten volumes were: NCG, up 28% MoM and 3% YoY; France Hubs, up 69% MoM and 34% YoY; Austria VTP, up 54% MoM and 42% YoY; and PSV, up 35% MoM and 43% YoY. Only Gaspool recorded a decline in volume, down 19% MoM and 5% YoY.
The brokers also gained some ground in the Coal market, with broker cleared market share increasing 4% vs. December 2017, at the expense of exchange executions. Volumes were up 47% vs. December 2017, but down 38% vs. January 2017. The theme throughout 2017 was increasing exchange executions in Coal – this time last year the broker cleared market held 82% of the total Coal market, so even though there has been an increase month on month, we are still at levels substantially lower than pre-2017. The API2 front month price dropped 6% this month after increasing prices throughout 2017.
This month sees the addition of Dutch and Belgian Power to the Euro Power grouping, and gC NEWC to the Coal grouping, and all commentary and charts now reflect these additions to the groupings. As our data for these markets starts only in January 2016, our history for the groupings also now only starts in January 2016.