European Gas and Power Set for Near-Round-the-Clock Trading
(Bloomberg) -- European natural gas and power markets are set to undergo a major overhaul amid plans to extend trading hours and align them with other global commodities.
The move comes after traders and hedge funds from across the world piled into Europe’s energy in the aftermath of Russia’s invasion of Ukraine in 2022, driving up volumes and liquidity. It also reflects the growing alignment between gas markets in Europe and the US as the latter has become a top supplier to the region, replacing Russia.
UK and European Union gas and electricity contracts will trade for 22 hours a day by Feb. 23, subject to the completion of relevant regulatory and governance processes, Intercontinental Exchange Inc. said in two separate statements dated Jan. 7.
The shift will help traders coordinate activities involving Europe’s gas and power contracts with US’s Henry Hub and also Asian benchmarks. ICE has said it consulted traders before deciding on the move and will confirm the effective date in due course.
“Given the importance of US LNG for European gas — and by default power — fundamentals, more overlap during US trading hours could eventually lead to stronger price convergence between the two markets,” said Rabobank energy strategist Florence Schmit.
European gas currently trades on ICE for 10 hours from 8 a.m. to 6 p.m. in Amsterdam. The new hours would be from 1:50 a.m. to midnight. Other energy products, including Brent crude, trade almost around the clock.
The move “will be most beneficial for US money managers,” who already have a big influence on European energy prices, said Tim Partridge, head of trading and risk management at LG Energy Group. While larger trading houses may be adept at dealing with the changes on the exchange, it could “detrimentally impact” smaller businesses, he said.
Last year, ICE saw record trading volumes in benchmark gas futures, although levels are still below North American contracts. Germany’s European Energy Exchange AG, is the main platform for power trading in continental Europe, especially for derivatives.
EEX, which currently operates from 8 a.m. to 6 p.m. for its futures markets, said the exchange is in constant dialog with members and stakeholders to ensure the operations “are in line with market demands” and will continue to evaluate developments.
(Updates with analyst and EEX comments from fifth paragraph.)
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