Investment funds’ long TTF position tops 129TWh: Update

Updates net long figure based on new Ice report released same day

The net long position of investment funds at the Dutch TTF gas hub has reached its highest since January 2022 at more than 129TWh, according to the latest data released by the Intercontinental Exchange (Ice).

Investment funds have traded much more heavily at the TTF over the past two months, with their net long position more than quadrupling to 129TWh on 14 June from 31.8TWh in early April, the most recent Ice commitment-of-traders report shows.

This is the largest net long position that investment funds have held in the past two and a half years. Late 2020 was the last time that investment funds increased their net long position so quickly, jumping from roughly 75TWh on 27 November 2020 to a peak of nearly 256TWh on 12 February 2021 (see investment fund graph). Firms began to unwind this net long position from May, and there was a switch to a net short position in April 2022-August 2023.

Continued TTF price volatility may have attracted more investment funds in recent months, particularly as the front-month contract earlier this month hit its highest since December, peaking at €35.88/MWh on 3 June. Russian pipeline gas used to provide the European market with a large degree of flexibility, but the loss of most of this gas, along with higher reliance on LNG, has reduced Europe's supply buffer and has exposed the TTF more to factors well outside Europe. Extended downtime at the Wheatstone LNG plant in Australia, a facility that provides no cargoes to Europe, caused the TTF front-month contract to jump to €36.12/MWh in intra-day trading last week. Similarly, news of shelling in the region of Sudzha, the location of the last still-functioning interconnection point between Ukraine and Russia, caused the TTF front-month contract on Ice to spike by more than €1/MWh in the space of two minutes before falling again. Such sudden jumps and falls have become increasingly common in recent months, with many traders noting the role of algorithmic trading in this phenomenon.

A volatile trading environment is more attractive to investment funds than to other types of market participants, as they make most of their money from price volatility whereas utilities make most of their money from the margins on their sales to customers and associated services.

The investment funds' move to a large net long position contrasts with a rapid move to a net short position by commercial undertakings, defined as companies with retail portfolios. These two trader categories each held net long positions of roughly 77TWh at the start of November. But investment funds had unwound this into a small net short position by March, while commercial undertakings continued to go longer, reaching a peak of 159TWh in mid-December. Mid-February appears to have been a turning point, with investment funds beginning to climb to a net long and commercial undertakings quickly unwinding to small net short.

This was mostly driven by commercial undertakings' increasingly large net short position for "risk reduction contracts", topping 161TWh, as a hedge for similarly sized net long positions on the physical side in storage (see commercial graph). This is only the third time since 2018 that commercial undertakings' aggregate position has been net short, with the only other notable time being for a prolonged period in January-August 2021, as well as one brief week in June 2020. This likely reflects historically high EU stocks at the end of the 2023-24 winter, which have to be counterbalanced by risk-reduction hedging contracts.

By Brendan A'Hearn and Matt Drinkwater

ICE TTF net positions TWh

ICE TTF commercial undertakings positions TWh