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Market Dynamics Report

October 2017: Volumes down MoM, French Power prices continue to rise driven by supply constraints and ICE winning in Coal.

October saw monthly contracts decline from their high in September to 7,053m, down 9.8% MoM. Gas markets were the main driver, accounting for two thirds of the total MoM decline. In contrast, strong YoY performances from Emissions (up 33% YoY) and UK Gas (up 5% YoY) have helped reduce the YTD deficit to 9.3% at 68,367m monthly contracts traded.

Power markets had a mixed bag in MoM changes. German Power drops from September to end the month 164 TWh down while UK Power and Nordic Power dropped 13% and 6% respectively. Meanwhile the least traded Power contracts had different fortunes with CEE Power, Italian Power and Spanish Power increasing by 3%, 5% and 8% respectively. In fact, CEE Power had the highest monthly volume recorded in October (since Jan-11) and is the only contract to be up across the board of metrics covered.

French Power front month prices continued to increase, up another €16.69 to €66.50 as nuclear reactor maintenance keeps last year supply constraints at the front of everyone's minds. Volume traded remained flat MoM at 132 TWh and is far below the record setting volume seen last October (193 TWh). Will we see a reoccurrence of the supply driven volatility seen last year? Or, does the flattening of volume in October suggest there is greater confidence in the reactors coming back online?

The Gas market was largely down MoM with NBP leading the way, down 198 TWh vs. September. TTF also saw a MoM decline, down 165 TWh to end the month with 131% of NBP's volume. Gaspool and Austrian VTP were the only contracts to show MoM growth. Gaspool recorded its second highest monthly volume on record (since Jan-11) to be up 5% to 133 TWh for October while Austrian VTP has continued its growth under EEX's guidance, up 8% MoM.

Coal volumes remained relatively flat MoM as front month prices continue to edge higher. API2 front month price of $94.80 USD is the highest we have recorded since 2012 and £2.20 USD above its peak in October 2016. What is driving the increase in price? Moreover, what role is China playing? A year ago, China restricted the coalmine operating hours during which time Coal volumes and prices increased substantially. This year prices alone are on the increase, API2 and API4 volumes are down 42% and 55% YoY respectively. Even with the subdued volumes, ICE has made continued gains in Coal accounting for 75% of cleared market share, up from 49% in Oct-16. The market share gains are coming through both exchange execution and broker cleared down YoY 13% and 14% respectively. That is in comparison to a 72% YoY decline in CME broker cleared volume.

Downloadable Content

File:
Euro Commodities Report

Downloadable Content

File:
Euro Commodities Report