Falling Liquidity at the NBP, could there be another reason?
August trade figures on the NBP (UK market place) and TTF (Dutch market place) are adding to the concerning trend of the last year or so.
ICIS, in its European Spot Gas Market report published yesterday (ESGM 24-172), comments on the latest figures which are showing a drop in liquidity for seasonal contracts (this winter and next summer) and a drop in the far curve (next year contract). In contrast, trades at TTF are showing a sharp increase.
As mentioned in a previous post there are “good” reasons for that fall in liquidity, one of them being the strong decrease in storage capacity in the UK. With 70% of it taken out of the market recently (Rough and Hole House Farm), no surprise asset backed trading is strongly reduced.
Another one, one that begins to emerge and may already be very influential on the far curve, is the lack of visibility on gas transportation tariffs beyond October 2019. The Gas Charging Review process has until now failed to deliver a solution acceptable for the UK market and there is no clarity at the moment of what may happen on this subject. We have been discussing it with other market participants and this uncertainty (i.e. this risk) is already affecting commercial trades.
This fall in seasonal and far curve liquidity should be a concern for the Government and the regulator as it will have a negative influence on the price paid ultimately by UK households and UK industry.
The Storengy Team