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Energy Market Highlights:

• Gas market price increased by 11% WoW as the market remains worried about the future of Russian gas supply.
• The forward power curve is still in a backwardation. However, the spread between Y+1 contracts and >Y+1 contracts has been reduced over the past week by having Y+2 contacts moving significantly higher (+15% WoW). This is likely because the market participants expect the war in Ukraine last longer than initially expected
• The EU banned Russian coal imports at the end of last week. This news has pushed Coal prices to the new historical highs
• A complete halt of Russian energy supplies to Europe will lead to an economic recession issue. The EU can’t replace Russian gas with LNG, Renewables and Coal in 2022-23.
• The EU Commission proposed a new regulation to have gas storage filled by 80% by 1st Nov 2022. This will keep gas prices elevated during the Summer season when it’s time to refill the gas storage.
• There’s a risk that Europe might not have a lot of gas in its storage to last through the next Winter.
• No major bearish news can be foreseen at this stage except for a possible economic recession, Covid and more Russian gas supply to the EU.

To read the prior week’s European Energy Market Update, please follow the link here.

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