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Liquidity at Czech VTP natural gas hub enjoys meteoric rise in December

09 Jan 2013 16:57:50 | esgm


Liquidity soared on the Czech VTP over-the-counter natural gas market in December as the virtual hub witnessed growth that was at odds with some of Europe's more liquid traded hubs.

According to ICIS data, over 2.2TWh changed hands at the Czech VTP during December, representing a trebling of volumes month on month. As recently as September, monthly traded volumes reached just 130GWh at the fledgling hub. The latest monthly figures equate to a 17-fold increase in liquidity in the space of just three months.

Just 200GWh were traded at the Czech hub throughout 2011, underscoring the VTP's meteoric rise.

Traders noted the arrival of London-based brokerage Tradition Financial Services (TFS) in August offered extra impetus to the market and has enhanced liquidity (see ESGM 13 August 2012). TFS was the second broker to enter the hub after the launch in April 2012 of the first screen by Czech brokerage house 42 Financial Services. ICAP has also come on board.

While traded volumes have soared in the past month, trading continues to centre on Day-ahead and front-month products. Sporadic deals were registered on Calendar '13 and February '13.

Czech VTP Day-ahead was assessed at a €0.25/MWh premium to its NCG counterpart on Tuesday, according to ICIS data. The spread between these products is monitored closely by traders active at the VTP, as is the spread to the TTF mainland Europe's most liquid hub.

Increased liquidity has coincided with the arrival of some of Europe's large trading houses at the hub. In December, the Geneva-based arm of Koch Supply and Trading confirmed plans to trade at the hub.

ICIS understands that several companies are adjusting their portfolios and looking to trade further east, as the means to generate profit from the more liquid hubs appears to be on the wane.

German utility RWE has also confirmed its presence at the hub. The company's Essen-based team has traded the Czech VTP over the past five months and is active on the prompt, front-month, front-quarter and front-year products.

"The market is just taking off and is obviously correlated with the NCG," RWE's head gas trader Kevin Alger said.

RWE also offers gas on its own platform, VOP. It will continue to operate this platform in harmony with its trading operations on the VTP.


Meanwhile, RWE has restructured its Czech entities as of 1 January. The activities of RWE in the Czech market will be overseen by RWE Česká republika.

Significantly, the restructuring sees incumbent RWE Transgas change its name to RWE Supply & Trading CZ. The company will be concerned solely with wholesale energy going forward.

"We continue implementing the planned restructuring of the group," said Martin Herrmann, chairman of the board of directors of RWE Česká republika. "Taking this step, we start a new stage of the RWE's operation in the Czech market. We will gradually consolidate all our activities in the local market into a clearly arranged organisation structure." JE

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