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Weekly European energy market update:

• Below-average French nuclear availability is likely to keep power summer contracts supported. Recently, EDF has found new cracks at 2 more reactors (Flamanville) bringing the forecasted electricity output down.
• Unless Russia’s supply of gas to the EU is increased, insufficient LNG capacities won’t be able to replace EU gas needs. As a result, the gas market can remain tight for the 3 to 4 coming years.
• Competition between Europe and Asia, for which LNG represents the only possible gas sourcing leads to higher gas prices in Europe to attract LNG carriers.
• Therefore, power prices will continue to be driven by the natural gas market (marginal cost). Each €1/MWh movement in gas price moves power by €2/MWh
• Many nations are considering imposing further sanctions on Russia which is likely to drive energy prices higher.
• All Russian coal imports to the EU must stop by 10 August 2022 under the EU’ 5th package of sanctions against Russia.
• 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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