Czech Energy Pricing Trends - 18 Feb. 2021

CO2 price (Dec-21) decreased by 0,44 EUR/t WoW to level 38,32 EUR/t. This week price reached a maximum on Monday when the price settled at 40,02 EUR/t level. Brent price (Apr21) increased by 2,79 USD/bbl WoW to 63,93 USD/bbl and today price trades around 63,5 USD/bbl. Coal API (Apr21) decreased by 2,85 USD/t WoW to 63,3 USD/t. This week electricity market was driven especially by decreasing CO2 and coal. The only factor pushing prices upwards is strengthening oil due to oil production reductions caused by unusually cold weather in Texas.

CO2 market remains very volatile and it seems that levels above 40,00 EUR/t will be a new norm. Some analysts even predict 100 EUR/t levels in the near future. Some voices, however, predict EU regulation if the price should jump above 50,00 EUR/t in the near future. These levels can bring existential issues to some energy companies across Europe in a situation when the whole region is significantly affected by the COVID pandemic. Some bearish sentiment is also felt due to slow progress in vaccination throughout Europe, still very high COVID cases in some countries, thus continuing lockdowns.

The near-curve market was affected by weather forecasts which predict above-the-average temperatures for next week. Far curve products, on the contrary, grew thanks to strengthening oil because some long-term gas contracts are oil-linked. Gas is also supported by high CO2 prices and due to this, it is crowding out coal from the electricity generation mix. Warmer weather and ongoing lockdowns across Europe will probably keep prices at bay until the end of February. However, in the case of cold March (forecasts), prices can again go up due to relatively lower gas-in-storage levels, therefore, Front Month product will remain quite a weather dependent. Consequently also summer gas can go up due to low gas levels at gas storages.

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Miroslav Ceman

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