FRANKFURT: Wholesale gas and gas futures trading volumes are rising in the Netherlands and falling in Britain, a sign that Dutch hub TTF is drawing financial traders away from its bigger British rival, a study said yesterday.
“Activity at the (British) National Balancing Point (NBP) has reduced and may continue to reduce further,” said Nigel Harris, co-author of the report which was issued by UK consultancy Prospex.
“At the same time, Title Transfer Facility (TTF) has grown to a level of liquidity that means NBP no longer has a clear advantage purely because of liquidity,” he added.
Prospex data showed that Dutch gas trading volumes rose by 17 percent in 2012 to 7,616 terawatt hours (TWh).
UK trading stayed flat at a larger 21,078 TWh. That rate was still 24.9 times Britain’s physical gas consumption, known as the churn rate - a figure that is unmatched in Europe.
NBP trading has continued to decline this year, while TTF volumes are still looking healthy, and the third-ranked German market is also growing, Harris said.
Gas traders throughout the region must contend with low price volatility and rising regulatory costs, while the use of gas for power generation is being squeezed out of the market, Harris said.
The Netherlands with its good transport links and North Sea gas reserves has become the preferred market for continental European gas forwards, which also creates a good basis for short-term physical deals.
Increased price convergence between the euro zone’s Dutch, German, Belgian and French markets also means the TTF attracts hedging and risk management from players outside of the Netherlands.
Germany, where consumption of gas last year eclipsed that of Britain for the first time since the mid-1990s, increased its gas trading by a fifth to 2,535 TWh in 2012.
The two German wholesale gas markets, called NetConnect Germany and Gaspool, had appeared set to challenge TTF’s supremacy on the continent soon after they were established in 2006. “But their growth rate has slowed, and Germany’s traders are strong participants in the TTF,” Prospex said.
The NBP accounted for 62 percent of all continental European gas trading activity in 2012, although that is down from nearly 90 percent in 2007.