Every quarter we publish an update of our Natural Gas Storage and Swing Report. It presents price assessments of a few standard storage and swing contracts, which you can benchmark to your own valuations. Above all, the report provides transparency to an otherwise opaque trading market, also revealing the underlying assumptions about market prices, market volatilities and trading strategies. Take advantage of our free service to you!
With our Natural Gas Storage and Swing report, we report about a few selected contracts. But of course we realize that you may have different needs! Our report compares the current quarter to the previous, but would you need data per month? Or do you need historical valuations? Or over a longer horizon? No problem, just contact us for more information.
We have in the past made customized reports for very different types of companies. For example, we provided data that was used in several arbitration cases between energy companies. Also companies used our analysis to facilitate their investment or divestment decisions.
Short-term trading attracted most attention over the last three months. European storages ended the winter at record high level, removing a big part of traditional summer purchases from the market. At the same time, reduced gas consumption in South-East Asia brought many LNG spot cargoes into Europe, being the only real gas flex taker in the world. These two effects caused the prompt and current season gas prices to plummet. As an example the TTF month-ahead contract lost about one third of its value over the last three months (from 14.4€/MWh to 9.4€/MWh) – the lowest level since 2009.
However, contracts after this summer showed little movement, underpinning the market’s belief that current market conditions are an exception. As a result, storage spreads of the current storage contract (SY2019) increased dramatically from approximately 5€/MWh to 9.5€/MWh. The spread for storage contracts that we consider in this report (SY2020) only showed a moderate increase, leading for example to only a 0.45€/MWh increase of the intrinsic value of our fastest TTF storage product.
Volatilities picked up over the quarter as a result of the price movements. With TTF spot volatility showing a 9% point increase to 49%. Forward volatilities increased as well.
All in all, this led to a strong increase in the storage value, especially for the faster storages. The value of the TTF 30/30 storage product went up with almost 20%, whereas the 60/120 storage product grew approximately 7%.
The increase in option value of the TTF swing contracts was mainly driven by the fact the curve went more into contango. This leads to an increase of intrinsic value of the fixed price contracts.
Please view the pdf to see all data and graphs:
All valuations have been performed with KYOS software and models, KyStore and KySwing. KyStore and KySwing support traders, portfolio and risk managers in natural gas markets. Inputs include market parameters, including our own suggestions, forward curves and other parameters and settings. The intrinsic value is based on the forward curve and takes tradable products and bid/ask spreads into account. Our software uses Monte Carlo simulations of spot and forward prices to provide the rolling intrinsic and option values. KYOS valuation software is widely used in the energy industry. You can find more information about our gas optimization software on our solutions page here.
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