Netherlands: Late near-curve rally forces traders back into market
Near-curve prices rallied in the last hour of trade at the TTF on Friday, taking many by surprise.
Although not explicitly confirmed, this was undoubtedly caused by counterparties stopping off their positioning in the run up to the weekend. The scene had been set early on, as many contracts were seen dealing only thinly.
This behaviour was exemplified by the March '11 contract, which did most of its trading in the morning, dealing fairly widely but in a narrow range in the run up to lunch. It opened at €21.60/MWh, nudging up to €21.75/MWh at around midday UK time, remaining at around this level until 15:20 UK time. Over the next hour, and in only very thin trade, the contract leapt up in around half a dozen clips to a value of €22.15/MWh, where it was also assessed at the close. It continued dealing for another 20 minutes.
"This was front-running by [a big US bank], knowing that some people are not allowed to hold an open position over the weekend (in case of further Middle East/North African conflicts) and they are short," one trader said. "It's ramped it up significantly."
In even thinner trade, April '11 dealt up from €21.75/MWh to €22.20/MWh. "It was mostly NBP-driven, but I'm not sure what happened," another trader commented.
Whatever did happen though, it was mainly confined to the very front of the near curve, as beyond this, although there were gains, they were less impressive; Summer '11 and Winter '11 rising by €0.20-0.30/MWh over the last hour. Furthermore, the gains mainly retraced earlier losses, as much of the near curve, such as March '11, opened on Friday at a discount to the previous day's close. This kept a lid on gains, limiting gains to around a quarter of a euro day on day.
Further out on the curve, and prior to the late rally, traders had been talking about the widening gap between TTF spot gas prices and their long-term oil-linked contract alternatives. "I'd guess we're about €5-6/MWh below the oil-link [long-term] contract," one trader said, adding that if oil surged once more (Brent was trading at around $111/bbl on Friday afternoon), it would only widen this gap. "Physically, there's enough gas around".
Spot prices, with the exception of Weekend, which dropped €0.30/MWh, closed higher day on day. RS
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