EU Power Pricing Trends | 7 May 2021
A week-on-week increase in temperatures and renewable output was not enough to temper gains in European power benchmarks last week. Instead, a bullish gas market dynamic and further gains in Europe’s carbon market drove CY 2022 contracts higher. Meanwhile, declining hydro reserves continued to lend considerable support to Nordic power prices. With many nations still battling a third wave, a double dip recession recorded in Q1-21 and a forecast growth rate of only 1.6% in Q2-21, European power prices sit in stark contrast to Europe’s current economic performance. Sentiment, however, remains bolstered by the expectation of a fast-paced economic recovery, assured by the vaccine rollout now picking up steam in Europe.
EU Natural Gas Pricing Trends | 7 May 2021
Injections into Europe’s long-term storage sites remained subdued for yet another week, despite a notable mid-week improvement in average temperatures and an uptick in wind-generated power. Driving the gains were bullish supply-side factors: LNG deliveries to NW Europe withered as tankers were persuaded away from the region on higher Asian LNG benchmark prices. Southbound Norwegian flows, although stable, remained capped on planned maintenance; while Russia opted, for a second straight week, not to take up additional pipeline capacity into Europe through Ukraine. Moreover, heavy, planned Pacific supply maintenance and high Asian demand for cooling over the Summer threatens the availability of LNG arrivals to NW Europe for storage reinjection. The confluence of these factors saw price gains across the curve - as forward contracts built in a greater risk premium.
EU Energy Complex | 7 May 2021
Despite the passing of April’s compliance deadline, the speculative rally in carbon EUAs resumed last week as the Commission signalled that it would not look to curb investor interest in Europe’s carbon market. Markedly, the combined value of the two U.S. listed carbon allowance exchange traded funds proceeded to top $250 million - evidence of the growing global financial interest in carbon for investment purposes. The subsequent 6th week of noticeable price gains once more underpinned the bullish energy market narrative, aiding upward movements in European power and gas contracts.
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