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Market Dynamics Report

May saw volumes drop after the seasonal anomaly of volume growth we saw last month. Volumes of 6.924 million monthly contracts traded were 15% down vs. April's 8.151 million monthly contracts traded, but up 48% vs. May 2015's nadir of 4.678 million monthly contracts. This fall in volume was coupled with a shift of market share back to brokers, with 71% of the 6.924 million monthly contracts traded via a broker (up 5% vs. April's 66%). Prices were up across the board MoM but volatility as reported by LEBA was down in all groups except API2. While all commodity groupings saw a drop in volume, the largest drops were in Euro Gas and Euro Power (both down 20% MoM) contributing 84% of the total drop in volume.

Five of the seven commodities included the Euro Gas grouping recorded volume drops MoM, with Austrian VTP (up 3% MoM) and Zeebrugge (up 37% MoM) bucking the trend this month. TTF had the largest absolute drop – down 432 TWh to 1,590 TWh vs. April's 2,022 TWh. Meanwhile NBP's decrease was limited to 50 TWh, maintaining volumes just above 1,700 TWh and regaining its place as the largest commodity by volume traded included in this report for May. Despite this, TTF remains king YTD 2016, at 9,533 TWh traded 103% of NBP's 9,289 TWh. Euro Gas saw a large shift in market share, with the brokers gaining 7% at the expense of exchange executions, again driven by TTF. NBP saw the largest shift in market share for the month, as the brokers gained 8% to 60% market share.

Nordic Power was the anomaly in Euro Power with volumes up 7% MoM to 154 TWh, pushing it up to the second largest Euro Power market, above French Power's 111 TWh traded in May. The remaining five power markets all saw drops in volume, with German Power's 165 TWh loss to 517 TWh vs. April's 682 TWh the largest absolute change. Euro Power's market share split remained unchanged with 46% broker bilateral / 24% broker cleared / 30% exchange executed.

The coal market this month saw the largest broker bilateral market share we have seen since August 2014, at 12% market share of 283 million metric tonnes traded. While cleared market volumes fell, overall coal cleared market share shifted back to CME, gaining 2% to 68% this month. API2 and API4 cleared market share did not move the same way – CME gained 3% in the larger API2 market while ICE gained 8% in the smaller API4 market. Despite volatility showing a positive trend, with May's volatility as represented by the LEBA volatility measure at 23% vs. April's 10%, API2 volumes did not grow. This is contrary to general market correlation where increasing volatility begets liquidity – what is the reason for this? Is it due to the relatively small size of the price changes, meaning that this general correlation is not seen until volatility reaches a certain level?

YTD volumes continue to grow, with monthly contracts traded up 19% YTD 2016 vs. YTD 2015. Amidst this growth, exchange activity is continuing to increase as several exchanges have launched or plan to launch contracts across the Euro Commodity markets. This month OMIP went live with French and German Power futures, recording a small amount of volume in French Power. Nasdaq has announced several new contracts to be traded across both the power and gas markets. EEX continue to add to the contract periods available for trading across their product suite, and ICE Endex will add to their power product suite during June. Exchange competitiveness is growing with both the larger international bourses and the smaller regional players vying for share.

Downloadable Content

File:
Euro Commodities Report

Downloadable Content

File:
Euro Commodities Report