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.
The third quarter of 2020 was another dynamic period in the European gas market, especially on the prompt period. Spot prices had basically only one direction during this quarter: up. The TTF day-ahead price increased from 5.66 €/MWh at the start of the quarter to 12.26 €/MWh at the end. Spot prices are now again at the same levels as during December 2019. The main reasons for the strong spot prices were strong gas demand out of the power sector due to gas replacing coal in Germany and various power plant outages. A strong decrease in LNG imports during this quarter, primarily a result of an exceptional hurricane season in the US Gulf coast region, also put upwards pressure to the European gas prices.
The back end of the curve did not see large changes. The stronger front end of the curve did lead however to decreasing price differentials relevant for the contracts we consider. The TTF Q1-2022 x Q3-2021 price spread for example narrowed over the course of the quarter from 3.25 €/MWh to 2.65 €/MWh. This resulted in a strong decrease in intrinsic value for the storages and fixed price swing contracts we analyze in this report. And since our TTF and NBP spot volatility assessment also went down slightly, the full option value of basically all our storage and swing contracts went down. The full option value of our slow-churn TTF storage for example went down 9% from 4.01 €/MWh to 3.64 €/MWh.
To read the complete report with graphs and tables, please click here: KYOS Gas Storage and Swing report Nr 28 Oct 2020
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, together with our own suggestions, forward curves and other parameters and settings. The model calculates the intrinsic value 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. Numerous companies in the energy industry already use our valuation software. You can find more information about our gas optimization software on our solutions page here.
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