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Market Dynamics Report

JULY 12 2014

July 2014

High market volumes across the board, especially in European and UK Gas, ICE continues to grow in NBP, while CME performs strongly in Coal.

July is traditionally a quiet month in the European Energy markets, with low volumes usually observed across the board. This month appears to be an anomaly, with July 2014 volumes up significantly MoM and YoY in all commodity classes. By monthly contract equivalents traded, total Euro Commodity July 2014 volume is larger than any month in 2013, and represents the third monthly increase in volume in a row.

Euro Commodity Grouping

Jun 13 - Jul 13

Jun 14 - Jul 14

Emissions

-42%

42%

Coal

-21%

8%

UK Gas

-32%

8%

Euro Power

-14%

28%

Euro Gas

-10%

22%

UK Power

6%

16%

July 2014 saw a record month in TTF since our volumes began in 2011, with this market growing to just under 78% of NBP this month. Total TTF volumes are up 61% YTD 2014, while broker cleared & exchange traded volumes have more than doubled in the same period. Broker bilateral had a strong month, growing from 83% in June to 88% in July, with 10% traded directly on exchange and the remaining 2% broker cleared. NBP also saw volumes increase in July, as this market continues its resurgence through 2014. Year to date volumes are up 27%. ICE continues to increase its share here, with 47% executed directly on the exchange and a further 7% given up for clearing. Although share is declining, brokers are also seeing higher volumes, with the total brokered market up 7% year to date. This month saw the inclusion of two additional brokers contributing to the LEBA volume report, bringing the total number of brokers contributing to eight.

We include the French Gas contract PEG in our report for the first time this month; although this market has seen volumes decline 10% year to date 2014, July has seen a 40% increase vs. June 2014. Both NCG and Gaspool continue to grow, seeing volumes increase by 38% and 45% respectively year to date.

What is behind the unusually high gas volumes this month? Are the heightening geopolitical tensions in Europe following the downing of the Malaysian Airlines jet in Ukraine on July 17th driving price volatility as fears grow over future supplies from the East? As we discussed last month, there is an underlying trend of a shift towards clearing in these markets, with NBP the most transparent example of this. TTF is beginning to show early signs of a potential shift, and while it is not significant enough to count as a trend yet we will continue to watch this and the other European Gas markets closely over the coming months.

July 2014 was another high volume month in the API2 and API4 coal markets. API4 continues its strong growth in 2014, with total volumes up to 23% of API2 year to date, vs. just 17% in the same period in 2013. CME had a strong month within the cleared coal markets, with their API2 volumes growing by 10% and API4 volumes growing by 72% vs. June. ICE saw volumes fall by 18% in API2 and 33% in API4 in the same period. As a result of this CME held just under 78% of the cleared market in API2 and API4 combined in July, with the remaining 22% on ICE.