EU Energy Pricing Trends - 22 Jan. 2021

EU Power Pricing Trends | 22 January 2021

Last week, benchmark power futures across Europe clawed back the losses sustained throughout Week 2. Carbon and gas prices led the gains as their respective markets reacted to the colder, early-February weather forecasts. Power futures pushed higher despite further signs that the European economy is still yet to experience the most acute economic ramifications of the pandemic. In the Nordics, the benchmark annual system-price trimmed nearly 5% week-on-week in contrast, with the region’s hydrological balances expected to increase 35% throughout Week 4.

EU Natural Gas Pricing Trends | 22 January 2021

The beginning of last week saw the front-month TTF and NBP contracts extend the losses from the previous week; with prices pressured by forecasts for milder, early-February weather, and stronger winds – which promised to relieve the recent pressure on the continent’s gas-fired generators. Tuesday saw a reversal in the price trend, with the carbon EUA futures climbing for the first time in five days, tilting the economics away from coal-fired generation, and towards gas. After a brief midweek pause, European gas pricing climbed sharply into the end of the week, as temperature forecasts were revised downwards and the region’s gas supplies remained tight.

EU Energy Complex | 22 January 2021

Weather fundamentals continued to dominate the conversation in European energy markets last week, and price swings in key markets ensued as temperature forecasts were frequently revised. Suggestions that early-February would arrive alongside more sub-zero weather helped carbon EUAs to resume their charge back towards record levels; even with the first EUA auction of 2021 imminent. Industrial compliance buyers also supported the carbon market, accelerating their allowance purchases during a rare dip in the market early in the week. Nevertheless, the bullish energy market backdrop remains largely inconsistent with the European economic outlook. Ongoing lockdown measures in Germany have led Economy Minister Peter Altmaier to revise down the nation’s 2021 growth forecast, from 4.4% to 3.0%. In France, business bankruptcies hit a 33-year low, despite the nation enduring its worst slump since the second world war. Government support has created an unprecedented concentration of “zombie businesses” in France, destined to perish when the fiscal taps are turned off; carrying grave ramifications for the French economy.

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