Trading Status

Trading Status

Here is a review of some recent trading status:
European gas trading status 2006.
Wholesale gas trading in Europe continues to grow, but at a slower pace than many traders and new entrants would like. The only truly liquid trading markets are in the UK and Benelux (at Zeebrugge and on the Dutch transmission network). Trading liquidity in other nations is very limited, although France, Germany, Italy and Spain all have nascent trading markets with strong growth rates.
Gas is traded at a number of key international border crossing points and at major junctions between pipeline systems. Trading based on virtual balancing points has also developed in a number of national markets. A virtual balancing point allows gas to be exchanged at a notional location at a single price, irrespective of where it is actually injected into the network or withdrawn from it. This creates a larger liquidity pool for trading than when gas is traded at a specific physical location.
Trading locations shown in red on the map included near this point have active, liquid markets. Trading locations shown in amber have sporadic trading. Virtual trading points with no active trading market are not shown.
Gas is traded both bilaterally in the over-the-counter (OTC) market and at a growing number of organized exchanges. Deals range from very short-term (day ahead) balancing trades to forward trades, mainly for gas to be delivered within the next year. Trading liquidity grew in all areas except for forward trading in the UK forward market in 2005.
The UK has the most actively traded gas market in Europe, with OTC spot and forward trading based on the virtual balancing point, NBP, at beach terminals, and at the interconnector to Belgium. NBP is also the basis for very short-term trading in the balancing market and for longer-term trading in the ICE futures contract. Derivative contracts including swaps, options and virtual storage contracts are also traded up to five years forward.
In continental Europe, the most liquid gas markets are in Belgium and the Netherlands. In Belgium, Zeebrugge is a major physical trading hub, supporting both bilateral and exchange-based trading. Because of the physical linkage between the two markets through the Interconnector pipeline, the Zeebrugge market functions largely as an offshoot of the UK market. In the Netherlands, trading at the Title Transfer Facility (TTF) provides the balancing market for the Dutch network, as well as a virtual trading point for participants in the Dutch and German markets.