European OTC natural gas trading through London soars over 25 percent amid price drops

Tuesday, 14 January 2020
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European natural gas trading in the day-ahead and month-ahead over-the-counter markets in London covering the eight major gas hubs in Europe soared more than 25 percent as prices plunged, according to the latest year-to-date figures.

Total European natural gas contracts traded in all the European instruments, including the eight largest markets, amounted to 28,047,100,446 megawatt hours for the 2019 year-to-date in October versus 22,379,555,826 MWh in the first 10 months of 2018.

Over-the-counter transactions mean that the natural gas contracts are traded via a broker-dealer network as opposed to a centralized exchange.

The OTC trading in the UK was led by the continental European Dutch Title Transfer Facility price followed by the UK National Balancing Point benchmark.

Only the Zeebrugge Hub and the UK NBP lost ground year-on-year through October 2019, while the French PEG and the Austrian hub both advanced, according to the data from the London Energy Brokers’ Association.

The London body is the industry association representing the UK Financial Conduct Authority-regulated wholesale market brokers in the OTC and exchange-traded European energy markets.

Trading in the Dutch TTF, both day-ahead and month-ahead, rose by 25.94 percent in the year to October 22,370,261,842 MWh compared with 17,763,170,069 through October 2018.

The UK NBP contract lost ground by almost the same amount as the Dutch TTF rose.

The October year-to-date figure for the NBP was 4,598,971,383 MWh versus 6,211,616,974 MWh through October 2018, a drop of 25.96 percent.

The London brokerage figures also showed that the average day-ahead Dutch TTF price for the year through October 2019 was 10.34 euros per megawatt hour ($3.37 per million British thermal units) in October 2019 versus 25.66 euros per megawatt hour ($8.39 per MMBtu) in October 2018, down 59.70 percent.

The average day-ahead NBP price for the year through October 2019 was 26.21 pence per therm ($3.43 per MMBtu) versus 66.97 pence per therm ($8.78 per MMBtu) in October 2018, down 60.86 percent.

The Dutch TTF and UK NBP prices are also the main indicators used when pricing Atlantic Basin LNG cargo trades.

However, NBP trading is being reduced because of a decline in UK physical gas assets along with the nation’s storage capacity.

Continental Europe also leads the UK on LNG imports, also due to the better geographical spread of storage.

For the month of October 2019 alone, the NBP was down 35.57 percent versus October 2018 to 427,098,093 MWh.

The Dutch TTF was 6.07 percent lower in October 2019 at 2,026,306,624 MWh versus 2,157,362,826 MWh in October 2018.

Germany’s two day-ahead trading hubs, the Net Connect Germany and the Germany Gaspool, were the next in volume OTC trading terms through London in October 2019.

They were followed in fifth place by the French PEG hub, now formally known as Trading Region France (TRF), the Italian Punto di Scambio Virtuale (PSV) in sixth, the Austrian Virtual Trading Point in seventh and the Belgian Zeebrugge Hub in eighth.

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