Dutch TTF overtaking NBP as Europe’s most liquid gas hub

Jake Horslen


Combined over-the-counter (OTC) and exchange liquidity at the Dutch TTF natural gas hub is close to overtaking its British peer, the NBP, data collated by ICIS shows.

The Dutch TTF recorded 1,297TWh of trade in July comprising nearly 1,070TWh in the OTC market and 228TWh at the ICE Endex and PEGAS exchanges, excluding OTC cleared volumes. This was just 51TWh behind the 1,348TWh of combined NBP trade recorded by ICIS, including 630TWh OTC trade and 718TWh trade at the same two exchanges.

At the start of the year, overall monthly liquidity at the TTF lagged 672TWh behind the NBP.

Traded volumes at the TTF look set to gain further ground or even exceed the NBP in August, based on the latest OTC trade data reported to ICIS and exchange trade conducted via the ICE Endex bourse.

Between 1-18 August, combined OTC and ICE Endex traded volumes have totalled 653TWh at the NBP and 669TWh at the TTF. Should this trend play-out for the remainder of August, it would be the first time overall liquidity at the Dutch hub has bettered its British peer. In terms of OTC volumes alone, the TTF has been Europe’s most liquid trading venue since March 2014.

Liquidity on curve contracts has been pivotal to the narrowing gap between the two hubs in recent months. In particular, strong volumes dealt on the TTF calendar year contracts amid weak oil prices and in the wake of the Dutch government’s decision to reduce the 2015 cap on Groningen production have boosted exchange and OTC liquidity at the Dutch hub. At the NBP, calendar year contracts are rarely traded.

Annual delivery contracts aside, liquidity on all other curve contracts at the TTF in the OTC market have exceeded the NBP by more than 30%, according to ICIS data. Regarding exchange trade, NBP volumes on the curve remain dominant, but the TTF has cut its deficit from 55% in January 2015 to 26% in July 2015.

Two market participants polled by ICIS believed the TTF could soon permanently become the most liquid hub for European gas trading.

“I don’t think this is a short-term trend,” one trader active at the TTF said, “[the] NBP is geographically isolated and traded in a currency that mismatches most people’s gas risk exposure.”

The majority of gas trading in Europe is conducted in euros, but the NBP deals in sterling. For shippers in mainland European markets, trading and hedging at the NBP introduces additional currency risk exposure which can be avoided by trading at the TTF.

“The only benefit [for trading the NBP] is that it’s got a solid cleared market,” he added, “I don’t see why a German with no assets in the UK would trade the NBP instead of the TTF.”

The second trader agreed, saying the potential for further growth of TTF exchange trade to continue made it likely that the hub would consolidate a leading position in Europe. jake.horslen@icis.com


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