Despite the record prices during August 2022, the findings presented in the study do not show correspondingly high illiquidity. CCP margins rose and fell with prices and volatility in line with expectations, with margin calls met on time. There were no signs of reductions found in derivative positions during this period. Taken together, these elements suggest that markets continued to function appropriately during the August 2022 market events.

Strong demand was found among end-clients, with traded volumes only slightly lower than a year earlier despite the much higher prices. The focus was particularly on contracts delivering in the autumn and over the winter. Trading patterns also varied by type of market participants, such as natural gas producers, electricity utilities and banks. Findings overall are consistent with the pressing need to replenish winter reserves among European end-clients driving demand and fuelling prices, given the sharp drop in Russian pipeline supplies.

Background

ESMA analysed the record price surge by looking at market prices, volatility, CCP margins and how these related to cleared positions, available liquidity and to the trading behaviours of the larger market participants. The regulatory data were used to assess the orderly functioning of EU natural gas derivatives markets in August 2022 and complements other analyses published earlier this year (January report | March report | May article).

The study was carried out in coordination with the Agency for the Coordination of European Energy Regulators (ACER) and complements its analysis of the summer 2022 events looking at the wholesale market fundamentals and gas spot markets, as presented in ACER’s annual report monitoring the internal gas market.