NCG night trade volume rises as day spread increases

The proportion of nightly day-ahead trade on the PEGAS natural gas exchange for delivery in Germany has spiked in recent months, as the price gap between day and night trade has widened.

When considering night trade as deals executed between 23:00 and 3:00 Berlin time, day-ahead trade conducted during the night for delivery at the German NCG hub amounted to almost 100GWh during the first half of July.

This amounted to 9% of all day-ahead trade conducted over that period. On average, the day-ahead was €0.326/MWh cheaper at night than the equivalent during the day.

During the first half of April however, day-ahead night trade made up only 3% of the bourse volume, with 36GWh changing hands. Back then, the average price difference between day and night was €0.182/MWh for the day-ahead product, with some sessions having day trade at a discount, and sometimes at a premium.

“We cannot confirm that prices at night differ much from prices during day time, we are very close to the market price most of the time,” an NCG representative said.

Balancing for a given gas day by both market area managers has to be completed by 3:00, GASPOOL confirmed.

The 17 transmission system operators active in Germany send flow data to the area managers which then calculate needed volumes for the entire market area and balance the grid on PEGAS.

Night desks

According to sources, day-ahead night trade forces the two area managers to enter an illiquid market as most small and medium sized trading business do not operate a night desk.

“From the smaller trading houses no one would set up a night desk. If anything it is the bigger [companies] that could benefit from a day-night arbitrage,” a source at a mid-sized German trading desk said, with other sources echoing this view.

Counterparties said that if an area manager is long and has to sell excess volume to balance the grid by the start of the next gas day at 06:00, sold gas is usually cheaper when compared to earlier in the day due to the absence of counterparties.

“Especially on GASPOOL L-gas [low-calorific gas] the illiquidity is really visible,” another source said, adding that at night it is “often a race to the bottom when NCG and GASPOOL are long”.

If the area manager is short however, the few counterparties during the night can drive up prices, a third source observed.

One source said it was unfair that such a small number of counterparties were influencing the market during night hours, a claim strongly rejected by the two area managers and the grid operators.

“We are buying balancing gas from, and selling balancing gas to, a lot of market partners, based on the best prices and in accordance with the [rules],” the NCG representative said. GASPOOL and transmission system operators agreed.

Traders have said, however, that large-scale nightly operations were not on the horizon for most companies as the overall trading opportunities were limited to the area managers’ needs.

German energy giants E.ON and RWE, which host some of the biggest trading operations in the country, did not respond to ICIS’ request for information. marcello.kolax@icis.com