Report: active trading strategy to realize value with a gas storage in a difficult market

20 September 2012

The years 2010 and 2011 have been a challenging period for many storage operators. The authors of the following article, Marcus Nossman, Cyriel de Jong, Hans van Dijken show that an active trading strategy is important. With this it is possible to achieve a substantial premium income from your storage facility. Even in challenging times! 

Article summary: How to realize value with a gas storage in a difficult market

You might think that it is impossible to make money with gas storages, given the current economic climate. This is not true. But to do so, you will have to apply an active trading strategy to achieve this. The article details a backtest performed on the German NCG market. When making the analysis, KyStore software helped to make a fair assessment of intrinsic and extrinsic value. The main lessons learned from this analysis are:

  • An active storage trading strategy can generate premium income for a storage owner. In the analysis, this is around 75% on top of intrinsic value.
  • This premium income requires both spot trading and active hedging in the forward market. Just spot trading is risky and can lead to a bad performance. Just forward trading is not enough to exploit the full potential of a gas storage asset.
  • Moreover, even in a seemingly dramatic year for gas storage trading, with virtually no difference between winter and summer prices, you can realize a considerable extrinsic premium.
  • The KyStore valuation software provides an accurate assessment. As a result, the realized value based on the KyStore trading signals is almost exactly the same as the projected value.

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