Cold and calm weather underpinned the early-January rally in European energy prices, and a number of short-end gas and power contracts, as well as carbon, notched fresh record highs last week.
In addition to carbon, European power futures felt the weight of falling feedstock prices; oil, coal and, crucially, natural gas all snapped their recent, energetic rallies.
Europe’s weather has been cold and calm of late, boosting natural gas demand for both heating and power generation. Moreover, LNG imports into major European terminals slumped to their lowest since September 2018. Elevated gas demand and sluggish imports saw aggregate European gas storage levels fall 50% faster in the first half of January 2021 than in the same period in 2020, 2019 and 2018.
The benchmark December-21 carbon EUA notched a record price of €35.30 last week as cold weather and limited power generation from renewable sources accelerated fossil fuel demand and consumption.
Forecasts for milder and windier weather look set to return power demand and fossil fuel utilisation to levels more often expected for this time of year.
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