November 2016: volumes up, broker bilateral share down driven by Gas, spotlight on Gas markets
November 2016 saw total market volumes grow 7% vs. October 2016, to 8.09 million monthly contracts traded. All commodity groupings saw an increase in volumes this month. Emissions grew by the largest percentage, up 23% MoM to 666 million monthly contracts traded, contributing 24% of total market volume growth. All other commodity groupings increased by single digit percentage changes. YTD total market volumes are 83.3 million monthly contracts traded, up 16% vs. YTD 2015. All commodity groupings have seen an increase in volumes YTD except UK Gas, which is down 2% YTD 2016 vs. YTD 2015.
The market share split of total market volumes swung back towards clearing this month as broker bilateral dropped 3% to 57% of the total market. Last month we reported on the steady increase we had seen in broker bilateral share since July 2016, so this switch back to the cleared market is an interesting development. The main driver of this shift was the gas markets (including UK and Euro Gas), where broker bilateral share dropped 4% to 67% in November, after four months of increasing bilateral share. Power (including UK and Euro Power) broker bilateral share increased in November, up 2% to 58%. As gas market volumes make up two thirds of total market volumes included in this report, they have a greater influence on total market volumes and market structure.
The commodity groupings of UK and Euro Gas include the gas hubs of NBP, TTF, NCG, Gaspool, France Hubs (PEG & TRS), Austrian VTP, PSV and ZEE. Chart 1 in the download report shows total volume traded by the gas markets over the last 24 months by gas market hub, and shows points in time where exchange competition in the various hubs increased. TTF and NBP provide the majority of volume traded – 86% in November. This total NBP & TTF proportion has been fairly stable over the last 24 months, while the split between TTF and NBP has switched. Last month we reported on the relative size of NBP vs. TTF and the recent emergence of TTF as the largest gas market. As stated earlier NBP volumes are down 2% YTD 2016 vs YTD 2015, and they are down 27% YoY. Given that NBP made up 35% of the market volume in November 2016, this is having a negative impact on gas volumes.
Chart 2 in the download shows the split of other gas volume across the smaller hubs. The evolution of total volume traded across these gas hubs has a similar pattern to the total gas markets – showing the seasonal fluctuations in volume during winter (Q1), the drop of volumes during the summer months, and picking back up towards the end of the year. The largest markets are the German hubs of NCG and Gaspool. The proportion of total other gas hubs traded volume by hub has been fairly static over the 24 months, with ZEE dropping 3% share YTD 2016 vs. YTD 2015 which was picked up by Austrian VTP and PSV. With the removal of NBP's drag on volume growth, we can see that volumes in the smaller gas hubs have increased, with November 2016 volumes up 18% vs. November 2015 and YTD volumes up 17%.
Chart 3 in the download shows the price movement of the various gas hubs since April 2015. There is a clear correlation in price movement between hubs that are priced on the same basis – NBP and ZEE priced in p/therm and the Euro Gas hubs priced in €/MWh. In the last few months we have seen disconnect between £ and € traded commodities - due to the FX rate movements we have seen since the Brexit vote?
This month we have looked at the gas markets in more detail and we will look to include a greater level of aggregated market analysis in the future.