September 2015: Volumes up; brokers gain in key markets; API2 record volumes; TTF gains on NBP
September marks the end of the third quarter and the end of the summer hiatus that traditionally hits the European Energy markets through July and August, and volumes were up almost across the board. Total monthly contracts traded in September hit 5.9 million, up 14% vs. Aug-15. Within this, all commodity groupings except UK Gas saw volumes rise MoM. Emissions saw the largest gain, up 82% MoM, with Euro Power up 36%, UK Power up 29%, Coal up 25% and Euro Gas up 5%. Amidst these increasing volumes at group level, API2 posted a record volume month with 347 million metric tonnes traded, while French Power and Italian Power both recorded their second largest volumes since our records started.
The dynamics of the markets continue to fascinate and intrigue us as there are seemingly random and out-of-season shifts in volumes and market shares. Euro Gas bucked the seasonal trends in 2014 with TTF posting records through summer, due to political instability in Ukraine causing a threat to security of supply from Russia. In 2015 we are seeing something similar in the Coal grouping of API2 and API4. API2 has posted two record volume months – January 2015 saw 322 million metric tonnes traded, while September 2015 broke this by 25 million metric tonnes. Meanwhile, API4 volumes have not seen the same kind of growth (January was API4's ninth largest volume month, and September the 23rd largest volume month). Price dynamics tend to drive volume in the majority of our markets, with high volumes generally supported by increased volatility in prices and / or large movements of price in one direction. Both API2 and API4 have experienced similar price trends this year, with API2 down 29% YoY and API4 down 24%. What's driving these record volumes in API2? Is it just a case of liquidity begets liquidity? How is the general macro environment for commodities impacting on API2 and API4 volumes? How much of the difference in API2 and API4 volume is due to the freight spread implied between the prices?
September also saw a shift of market share back to the brokers in most markets. Broker bilateral market share in UK Gas grew 7% vs. August; the share of the Euro Power brokered market increased 6% vs. August - 5% broker bilateral and 1% broker cleared; and the Emissions market saw the largest shift across all groupings, with broker cleared volumes gaining 27% market share vs. August 2015. These shifts were all at the expense of exchange executions. These shifts, happening during a month of increasing volumes, test the theory we have often written about – that the exchanges grow in periods of increasing liquidity. Euro Gas was the only grouping that recorded an increase in the cleared market, gaining 1% vs. Aug-15. This move was driven by PEGAS's exchange execution growth in NCG, Gaspool and the French Hubs, as the TTF cleared market was stable at 29%.
TTF volumes were up 8% MoM. TTF has been nipping at the heels of NBP in terms of total market volumes for a while now, and NBP volumes were down 1% MoM. Given this, TTF managed to grow to 97% of September NBP volumes. This is the highest proportion of NBP from TTF since our records began, and up 8% vs. August's 89%.