European Energy Market Highlights:
- European electricity prices dropped this week following the EU Commission’s announcement to redesign the electricity market mechanism amid the skyrocketing power price. Y+1 German power contract decreaed about -50% from its high of 1.000 EUR/MWh last Fri.
- EU gas storage reached 81% capacity this week ahead of the original plan. However, the expected restart of Nord Stream 1 on the 3rd of Sept is not happening following Gazprom’s announcement this week. The market fears that Russia will fully cut gas flows to Europe are now materializing.
- The competition among Europe and Asia for LNG gas is intensifying to secure supplies for the upcoming winter. Analysts believe that Europe gas prices will not return to normal levels until 2027. The war in Ukraine caused a supply shortage of Russian gas to the EU, which normally covers 40% of its needs.
- The European Commission advises governments to set a maximum price for renewable electricity producers to redeploy any excess profit these companies generate to vulnerable consumers.
- Overall, the energy market price outlook remains still bullish. Russia is likely to completely stop gas flows to Europe. And the EU leaders are preparing for a “worst-case scenario” for this winter.
To read the prior week’s European Energy Market Update, please follow the link here.
