German GASPOOL gas trade to remain high but below NCG volume

Over-the-counter (OTC) trade on the German GASPOOL market is unlikely to exceed NCG hub volume for a second month in a row despite a successful capacity auction on Monday and favourable price differences.

The German NCG hub is usually the more liquid one of the two but due to high imports of Russian gas via Nord Stream and heavily discounted GASPOOL products, GASPOOL volume surpassed that of the NCG for the very first time in October. Trade data indicates that this is unlikely to repeat, but GASPOOL volume could nonetheless remain elevated in the longer term.

One trader at a major German trading house said one month of higher GASPOOL volume would not be enough incentive to restructure a trading portfolio. Instead, “the market should be closely watched to keep track of new developments,” the source said.

A second trader at a German utility said that October’s volume could have been a one-off “but if GASPOOL volume outturns higher again in November it could become more interesting”.

Nord Stream

All of the additional 35 million cubic metres (mcm)/day of capacity offered for December delivery at the Greifswald beaching point was auctioned on Monday morning, according to pan-European capacity allocation platform PRISMA.

Around 165mcm/day of Russian gas enters Germany at the Greifswald beaching point via the Nord Stream pipeline. Imports slowly ramped up from just over 120mcm/day in August, following a ruling that would allow the full use of the pipeline (click here to read story).

The rise in imports almost doubled GASPOOL liquidity from August to September. What pushed GASPOOL volume past NCG volume in October was the widening price difference between the two hubs. GASPOOL liquidity is likely to grow further as the spread continues to widen in November.

Price spreads

The average month-ahead contract traded on GASPOOL during October was around €0.30/MWh cheaper than the NCG equivalent – a six-month high. By 17 November, the price difference grew to €0.40/MWh, approaching a level last seen at the start of the year when Nord Stream flows were briefly permitted for the first time.

The price spread might have incentivised some traders to buy up volume on GASPOOL and ship it to the NCG and Dutch TTF markets to profit from the arbitrage.

But only those market participants with sufficient transport capacity would be able to profit from this arbitrage. “Location spreads could have played a role but a small one. I think it would be difficult with the limited available capacities,” another source said.

Outlook

Higher Nord Stream flows, widening price spreads and growing GASPOOL volume all attributed to the trend in October, but November trade so far shows that it is unlikely that GASPOOL will once again exceed NCG volume.

During the first 13 sessions of November, 52TWh changed hands on GASPOOL, whereas it was 20TWh more on the NCG. This could be a first indication of a return to the norm where NCG volume outstrips GASPOOL trade.

During the first 13 sessions of trade during October, NCG trade also exceeded GASPOOL trade but only by 2TWh, making it easier for GASPOOL to catch up.

Market participants contacted by ICIS agreed that increased imports from Nord Stream were the main reason for increased GASPOOL trade. This trend is likely to solidify but a permanently more liquid GASPOOL hub is unlikely, market participants agreed. marcello.kolax@icis.com