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WEEKLY ENERGY MARKET UPDATE:

• Power prices continue to be driven by the natural gas market (marginal cost). There’s an ongoing debate at the EU level to discontent the power market pricing from gas or change the merit-order pricing rules.
• Oil prices moved lower after the IMF downgraded its forecast for global economic growth as well as due to the prolonged lockdowns in China.
• Currently, the lockdowns in China have helped to ease the market prices. However, Asian market could experience a hot summer with above than average temperatures, translating into high power demand.
• For now, Europe is able to secure LNG today. However, the LNG competition can intensify when Chinees demand is restored. In addition, Europe doesn’t have sufficient LNG capacities to replace Russian gas needs. Therefore, a tight gas supply is expected for the 3 or 4 coming years.
• EU nuclear availability is at a historical low today as many French nuclear reactors are offline due to technical issues.
• The possible economic recession may help to lower commodity market prices. Yet, gas price is still likely to remain well above the prior historical average of 20-25 EUR/MWh
• The European Union is considering a ban on Russian oil that would tighten supply.
• Russia has announced this week it would stop supplying gas to Poland and Bulgaria. Concerns about the future of the European gas supply remain high, as the fears of a further escalation of the war in Ukraine and the potential complete stop of Russian gas flows to Europe continue to add bullish pressure to the market. The European gas storages are still recovering from the past Winter lows.

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

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