EU Energy Pricing Trends - 14 Jan. 2022

EU Power Pricing Trends | 14 January 2022

Unsurprisingly, sharp increases across Europe’s gas market lent noticeable support to European power contracts last week. Providing additional price support was a noticeable lift in carbon prices. The cost of polluting in Europe hit an almost seven-week high amid concerns that potential conflict in Ukraine could send the continent’s gas prices surging, making the dirtier fuels comparatively more profitable to burn, with coal currently set to be cheaper to cover any demand shortfall through to December 2023. Meanwhile, in the Nordics, the regions high hydro generation sheltered the market from the climbing gas and carbon prices. In France, national strikes continued to curb generation capacity with more than 5GW cut on Wednesday.

EU Natural Gas Pricing Trends | 14 January 2022

Near-end gas prices were directed by fluctuations in key pipeline gas supplies last week, while traders remained on edge over escalating geopolitical tensions surrounding Ukraine. Tuesday saw orders to send gas through Ukraine rise
to the highest level this year. However, flows had subsequently declined again by Thursday. Further exacerbating the reduction in gas supplies was an outage from Norway’s biggest field, Troll, which saw southbound Norwegian gas flows curbed until Saturday. Meanwhile. data showing the diversion of LNG tankers away from Europe and towards Asia, as Japanese buyers returned to the spot market seeking shipments, provided further support to European gas
contracts. Limiting the upside, however, were week-ahead forecasts of mild and windy weather across mainland Europe which are expected to materially reduce Europe’s demand for gas, for both heating and power generation.

EU Energy Complex | 14 January 2022

With low gas inventories, currently at 40%, and tight gas supplies, a potential Russian invasion of Ukraine is a clear and present risk that’s hanging over the oil and gas market, with the initial uncertainty around an incursion’s impact on gas flows expected to add a significant risk premium to European gas prices. Against this backdrop, European governments are under increasing pressure to alleviate the unusually high energy prices. To ease supply concerns, the EU were discussing the possibility of increasing imports into Europe, with meetings planned to consider shipments from Azerbaijan and the U.S.. In addition, the Nord Stream 2 pipeline’s operator said on Wednesday it had set up a
German subsidiary to comply with German law. However, the certification process will remain halted until the main assets and people have been transferred to the German unit.

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