Daily market update

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Energy markets update: With high levels of volatility in the energy markets due to the conflict in Ukraine, we are giving daily updates:

Date: Friday, 27 May 2022

UK power and gas markets traded flat across the forward curve yesterday, however day-ahead markets continued to slide after spiking earlier in the week. Day-ahead baseload was £90/MWh this morning, down from £138/MWh earlier this week, reflecting warm windy conditions. The Continental supply outlook is currently stable, although maintenance on Norwegian fields is reducing exports by around 10% from peak flows last month.

Japan will restart nuclear power stations idled in the aftermath of the Fukushima disaster. PM Kishida reaffirmed that the government is not considering replacement of existing facilities but that the move would help stabilise energy supply. Until 2022 Japan was the world’s largest importer of LNG, superseded by China, but rapidly increasing competition from Europe has put pressure on its security of supply.

The UK is to impose a 25% ‘windfall’ tax on earnings from North Sea oil and gas production, expected to raise £5bn in the coming year, with the Chancellor Rishi Sunak citing extra-ordinary profits created by a global market as opposed to innovation or efficiency. Funds raised will contribute to a £400 energy bill credit for all households, and an additional £650 cost-of-living grant for 8 million low-income households. Sunak insisted the grants will have a limited impact on inflation.

Date: Thursday, 26 May 2022

UK energy markets gained again slightly yesterday, retracing some of the losses made in the past fortnight. Increases were largest in the front end, with Winter 22 gas jumping 4.6% – although moves in power were more muted. The lack of new major bullish drivers means that current upward momentum is limited, and rising evidence of demand destruction amongst domestic consumers (which will be compounded by Ofgem’s 40% increase in the price cap for Winter) could introduce bearishness in front seasons.

Continental gas markets have remained stable over the last fortnight due to broad expectations that Gazprom wouldn’t cut-off gas supply to any major European customer regardless of their rouble payments position. Poland, Bulgaria and Finland were minor consumers of Russian gas and the Baltic states unilaterally ended imports at the start of April, effectively leaving few other EU targets for Russia to pressure with gas supply cuts. Punctuating these expectations, Greece’s largest gas importer made payments in euros earlier this week without retaliation from Russia.

Fundamentals will soften going into next week, as temperatures dive and wind power generation falls. This is a blip, however, with forecast expected to return to 3°C above the average in early June – helping drive rapid flows into gas storage across Europe, with EU-wide levels at 44% of capacity compared to 35% at this time last year. It remains to be seen if this pace of fill can be sustained over summer, with a murky supply outlook clouding forecasts.

Date: Wednesday, 25 May 2022

UK gas and power markets posted gains of 2-3% across the forward curve yesterday, while day-ahead baseload is down £9.50/MWh to £112/MWh. Front-end API2 coal has fallen by as much as 14% in the past two days, following softer gas prices in Europe after forward contracts dropped over the past fortnight. Asian coal prices remain firm however, reflecting a continued tight global market.

S&P Global’s May flash Composite PMI for the UK released yesterday is down at 51.8 from 57.6 in April, a fall greater than any seen pre-Covid. Such a slowdown in business activity, previously robust, was far worse than all forecasts and has intensified fears of an imminent recession. This is a rising driver in energy markets, and will put increasing bearish pressure on contracts W22 to W23.

TTF spot prices have tumbled over the past week as the risk premium has fallen on stable supply, narrowing the spread to NBP from €74/MWh to below €30/MWh earlier this week. A weakening LNG roster has helped this, as strengthening Asian demand – due to warming weather and an expected easing of China’s lockdowns – has begun cutting into deliveries, with only 24 of the 30 originally scheduled cargoes in Europe unloaded last week. TTF’s premium over the Japan-Korea Marker (JKM) has narrowed to below €12/MWh, down from €29.45/MWh a week ago.

Date: Tuesday, 24 May 2022

UK gas and power forwards dipped by 2-3.5% yesterday following stronger fundamentals and stable near-term gas supplies, with Gazprom stating that half of its 54 clients have opened accounts with Gazprombank to facilitate rouble payments – including Germany and Italy. A choppy outlook for Norwegian exports is hampering downside however, with summer maintenance expected to persistently restrict output by around 10%.

EU Dec-22 carbon prices have dropped 15% in the last week, eliminating gains made since the start of the month. Falls have been driven by the European Commission’s (EC) intention to sell 250 million additional EUAs to help fund its shift away from Russian energy. This represents an increase of 40% on the number of permits originally planned to be auctioned this year. UKAs have followed EUAs, sinking 10% to £80.10/tCO2 or about £36/MWh for a CCGT.

The EC announced yesterday that the EU will begin jointly procuring gas before winter. This would be voluntary, but participants will pool demand and coordinate infrastructure. The EU’s energy policy chief suggested that this strategy would make it possible to unlock volumes not currently on the global market, citing the US-EU LNG deal from March for 15bcm (158TWh) this year.

Date: Monday, 23 May 2022

UK gas and power forwards made only small moves on Friday, with 1-2% losses in the front-end offset by 1-2% gains from Winter 2023 onwards. Wind power generation is expected to be high for much of this week, offsetting gas for power demand, while temperatures will remain above the seasonal average dampening domestic gas consumption. Combined with a strong LNG arrival schedule, this may throw a renewed dampener on day-ahead markets, which had rebounded last week.

As expected, Russia halted flows of natural gas to Finland on Saturday. Helsinki had previously refused to comply with Putin’s rouble payments demand, although the cut-off also coincided with Finland’s announcement of its application for membership of NATO. To combat lost supplies of 37GWh/d, Finland has become the latest European country to charter a floating LNG regasification facility.

Despite initial expectations that an EU embargo on Russian oil would be passed easily, after nearly three weeks of negotiation the package looks no closer to being approved largely thanks to opposition from Hungary. Germany indicated this morning that it would support an EU26 embargo (EU27 less Hungary), although there isn’t yet a precedent in this approach. Brent crude cooled over the last week, and is currently trading down 4% at $110/Brl.

Date: Friday, 20 May 2022

NBP and TTF gas contracts have continued yesterday’s losses this morning as Norwegian exports rose after an early outage, whilst Russian gas flows have also remained stable; this has allowed European storage to remain injecting at around 0.4% per day, currently at 41.2%. NBP Winter-22 is at 232p/th after closing yesterday at 237p/th, whilst contracts for this weekend remain far lower at 85p/th.

Oil prices continue to fluctuate around the $110/brl mark, with investors worried about weakening economic growth hitting demand balancing a potential EU Russian oil ban. This morning has seen some early losses Brent Crude futures slipped 0.5% to $111.45/brl.

Following on from Russia cutting gas supplies to Bulgaria and Poland last month, German big business is putting together a rationing strategy amid fears that Russia could cut their supplies. Gasum, Finland’s state-owned energy provider has today announced that Russia will be cut off as of Saturday, following increased tensions from their bid to join NATO, providing further nervousness in Germany that they could be next.

Date: Thursday, 19 May 2022

As expected, the EU yesterday unveiled their 5-year plan to wean off Russian oil and gas imports. The plan requires an initial €210bn investment, which includes: €86bn for renewable energy, €27bn for hydrogen infrastructure, €29bn for power grids, €56bn for energy saving and heat pumps and €10bn for gas and LNG projects, which will help to diversify any imports. A further €90bn is then expected to be needed in the years up to 2030.

UK power forwards slipped yesterday, with June-22 closing at £176.74/MWh, though prices have remained around this mark for the last week with no significant changes coming out of Russia/ Ukraine. Day ahead prices continue to trade far lower at around £120/MWh with minimal short term supply fears.

Brent crude futures are currently trading at around $110/brl, falling from $113/brl yesterday morning with fears of demand destruction over rising inflation and China’s zero Covid policy. Prices remain high however as an EU ban on all Russian oil imports loom, which would trigger a further increase.

Date: Wednesday, 18 May 2022

Winter-22 UK gas and power markets posted marginal increases to close 2.4% and 3.6% higher respectively, with a weaker supply from UK LNG terminals and stronger demand expected. Front month Dutch TTF gas prices also rose on Tuesday afternoon, with the European Commission’s announcement that EU companies can still pay for Russian Gas in euros but that they are not permitted to open a roubles account with Gazprombank, stoking fears over supply disruption.

The European Commission is today set to announce its plan to end its reliance on Russian oil and gas by 2027. Brussels expects the strategy to require up to €210bn in extra investment, which the EU will support by freeing up more money from its Covid-19 recovery fund. The plan will outline 3 main areas: the faster roll out of renewable energy (Germany, Belgium, the Netherlands, and Denmark are set to announce a plan to build at least 150 GW offshore wind capacity in the North Sea by 2050), increasing efforts to reduce demand/increase efficiency, and switching any imports to other nations.

European gas storage injection is well underway, rebuilding from its Winter low at a record rate as buyers are outbidding competitors from Asia – future contracts or North-West Europe delivery are trading over 45% higher than for deliveries to North-East Asia. Storage levels have risen by 151 TWh since the start of April, with stocks currently at 450 TWh, which is now in line with the previous 10-year average.

Date: Tuesday, 17 May 2022

Little gas was booked for June delivery in yesterday’s monthly capacity auctions (perhaps unsurprising as this has been rapidly declining over recent months). The European market didn’t react to this with the TTF showing a discount across the curve on the day by around 4%. UK NBP saw an increase for June – but later dated contracts showed a discount.

French power company Engie has announced this morning that it has agreed with Gazprom on a scheme to pay for Russian gas in roubles. Engie has reported that it has agreed on a solution in line with both companies’ expectations in terms of currencies and sanctions, but has declined to comment on whether this meant the utility has opened (or will open) an account with Gazprombank.

EU foreign ministers were yesterday unable to convince Budapest to lift its veto of a proposed ban on Russian oil imports, with a ban requiring approval from all EU nations. With an import ban (which would tighten global supply) yet to materialise, we could see some downward pressure on oil prices.

Date: Monday, 16 May 2022

Dutch TTF gas prices fell this morning as the EU commission confirmed that EU companies can pay for Russian gas with roubles, with June-22 falling by €7.40/MWh to €92.40/MWh. If a transaction is deemed complete as soon as payment is made in euros to Gazprombank, the payment can then be converted to roubles after this as the purchaser is not directly dealing with the Russian Central Bank.

Russian energy supplier RAO Nordic confirmed on Friday that power exports to Finland will be suspended from 1 am local time on Saturday as it has not been paid for previous deliveries. It is thought that this could be in retaliation to Finland’s desire to join NATO, with President Sauli Niinisto confirming on Sunday that his country will apply for membership to the alliance. (Finland has been of neutral status for the past 200 years). Russian imports account for around 10% of Finland’s total power consumption.

Oil prices have remained high but fairly stable, with Brent Crude futures slipping 28 cents this morning to $111/37/brl. Widespread lockdowns in China as a consequence of the nation’s continued zero-Covid policy have dampened demand, and along with weak economic data from the country there are fears of a global recession. The EU, however, is still hopeful of imposing a ban on all Russian crude imports, keeping prices high; Lithuania has stated that the ban by the bloc is “being held hostage by one member state”, widely thought to be Hungary.

Date: Friday, 13 May 2022

Front-end UK gas rose by 10% yesterday, pushing Winter 22 baseload up 8% to £254/MWh as a heightening of fears over the stability of Russian supplies hit markets. The remainder of the baseload forward curve gained 2%, and day-ahead rose 8% but closed at £82/MWh – far below the £156/MWh final trading price for May baseload two weeks ago.

Gazprom stated yesterday that it would no longer be able to ship gas to Europe using the Yamal-Europe pipeline, one of the three main routes for Russian gas exports to Europe. Although westbound flows on Yamal-Europe have been rare in the last six months and the current supply situation is essentially unchanged, a formal renouncement of the pipeline bodes poorly for Russian gas import volumes in the short to mid-term. Flows via Nord Stream are flat, and flows via Ukraine are up 50% to 946GWh/d.

Hammerfest, Equinor’s Arctic LNG terminal, is due to come back online on Tuesday after 20 months of maintenance – the result of a fire doused using seawater. Its single ‘train’ (gas processing line) is capable of producing 59TWh of gas a year, and will increase Norway’s gas exports by more than 4% on average – cementing its position as the Continent’s largest supplier.

Date: Thursday, 12 May 2022

UK gas and power markets were largely static again yesterday, although bullish action is expected today with gas-supply related announcements from Russia. Day-ahead UK baseload continues to trade well below £100/MWh at £82/MWh. The discount on NBP gas compared to TTF remains at record highs of €73.80, fuelling high exports to the Continent, and the continuing strength of TTF means it commands a €17.80/MWh premium over the Japan-Korea Marker – attracting LNG cargoes westward.

Continental gas markets largely shed concerns over the Ukrainian restrictions of Russian flows in trading yesterday, with front-month TTF gas down 10% week-on-week. This has been aided by expectations that payments for Russian gas will be able to continue through a workaround, easing tensions over what could have been a supply shock in the coming weeks as payments came due. However, in an announcement this morning Russia stated it is sanctioning European-based Gazprom subsidiaries which own and operate gas infrastructure, with the immediate implications for supply unclear.

The IEA has said in its monthly oil report that lower Russian exports will not create a supply shortfall, as rising output from OPEC and ongoing lockdowns across China dampen demand. More broadly, markets fear a global recession could douse the commodity boom, a rising driver in energy markets. NIESR, an economic think-tank in London, said yesterday Britain is on course to enter a technical recession (two consecutive quarters of contraction) in the second half of this year.

Date: Wednesday, 11 May 2022

Front-end UK gas was up 4% yesterday as Russian gas flows via Ukraine were partly suspended, although day-ahead power remains below £80/MWh. The remainder of the forward curve for gas and power was largely flat, with only Brent crude seeing a notable decline of 3.3% to $102.46/brl as the EU once again failed to pass it’s ban on Russian oil imports.

The Ukrainian gas transmission system operator GTSOU has said that it would suspend flows of Russian gas through a transit point in the Luhansk region controlled by Russian forces today. GSTOU declared force majeure after raising concerns that equipment at the interconnector was being tampered with and gas withdrawn. GTSOU suggested it would transfer capacity to a Ukrainian-controlled entry point, although Gazprom has stated that this is “technically impossible”. Russian flows via Ukraine are down at 717GWh/d this morning compared to a stable level of 993GWh/d this month.

The Indian government has approved regulatory changes which make it possible for generators to pass through higher fuel costs. The inability to do so in the past placed an artificial constraint on generation capacity during periods of high global coal prices, which has become particularly acute this year. Generators can now dip into global markets to top-up supply of thermal coal, although they will largely chase lower grades compared to European demand for high-energy grades. API2 coal for 2023 delivery is trading at $232/t, up 156% this year.

Date: Tuesday, 10 May 2022

Prompt gas and power plummeted yesterday – a strong LNG arrival schedule, ongoing warmer than average weather, and an uptick in wind generation output across the UK combined to suppress demand for gas. UK day-ahead baseload was trading as low as £70/MWh this morning, with NBP gas at a 2-year low of 30p/therm. Front-month power fell by just over 2%, reflecting ongoing concerns over security of gas supplies, with fears of a Russian gas cut off made real by a report that Germany is preparing a crisis plan for such a situation.

The LNG import roster for the UK is slightly weaker than a fortnight ago but very strong for May, with 6 cargoes expected in the coming 10 days totalling 7,100GWh or 4.5 days of current demand. With the UK taking a large number of cargoes, the TTF-NBP spread set another record high of €74/MWh of gas yesterday morning – continuing a six-week long decoupling between Continental and UK gas prices.

Brent crude fell by $6 to $106/brl yesterday after Brussels shelved plans to prevent the EU shipping industry from transporting Russian oil, following pressure from Greece and Malta. It is thought that after a wider agreement among the G7 stalled, shipping from other Western states would have undermined the EU ban. The European Commission still aims to ban EU companies from providing insurance on the shipping of Russian oil, essentially an embargo by other means.

Date: Monday, 9 May 2022

UK energy markets saw fractional losses on Friday as markets took a breather after a bullish week, which saw losses incurred in the last week of April recovered, and in the case of Winter 2023 gas and power exceeded. Winter 2023 baseload now trades above £183/MWh, a month-on-month increase of almost £50/MWh, compared to £237/MWh for Winter 2022, which is essentially flat this past month.

The fundamentals outlook this week is strong, with wind power generation expected to pick up markedly compared to last week. This has helped push day-ahead power prices down to £91.50/MWh this morning, down more than £50/MWh compared to a week ago. Despite falls in prompt-gas in European markets the TTF – NBP spread has risen to a new record high of €68/MWh, the result of strong UK fundamentals.

EUA front-December carbon prices closed at €91.54 on Friday, returning to the record highs of the carbon bull-market in February. The move was helped by a brief stalling of gains in coal, but momentum this week could be bearish as global recession fears mount, which could lead traders to trim their holdings, and warm and windy weather stifles gas and coal demand.

Date: Friday, 6 May 2022

In a continuation of the sharp recovery begun on Wednesday, gains were made across the power and gas forward curves yesterday with baseload for delivery in 2023 rising almost 5%. UK Winter 2023 baseload set a contract high of £185/MWh, increasing its spread to Summer 2023 which closed at £171/MWh and continuing a two-week divergence between the contracts, which had been moving in lockstep.

Germany expects to have two floating LNG terminals by the start of 2023, enabling the import of up to 148TWh/year. In turn, US exporters expect to be delivering 20% more LNG by the end of 2022 compared to Winter 2021, making the US the largest exporter of LNG in the world and Europe’s principal origin of imported natural gas. The spread between European TTF and Asian JKM benchmarks stands at nearly €27/MWh, helping to attract cargoes westward.

Hungary, Bulgaria, Slovakia and the Czech Republic are seeking multi-year delays on the EU’s toughest round of sanctions yet, published on Wednesday. The proposal, which requires unanimous approval from the 27 member states, seems unlikely to pass this week unless a compromise is reached. The tussle over the terms of the sanctions has highlighted the probable difficulty of passing sanctions on gas, which is more crucial to EU states and less replaceable than Russian oil.

Date: Thursday, 5 May 2022

UK gas contracts posted gains of more than 5% across the forward curve yesterday, with 2023 seasons seeing an 8% rise. These moves are partly the result of an unexpected 5% fall in total Norwegian exports, principally affecting supplies to the UK – however with IUK capacity constrained, the UK system has seen large oversupply in recent days thanks to warmer-than-average temperatures. UK DA baseload is trading at £140/MWh, compared to £178 on month-ahead.

Gas storage in Europe (EU27+UK) is currently 34.5% full after a rapid start to the storage season, up from a Winter minima of 25.5%. This is despite broadly average temperatures across NW Europe, as high gas prices have put pressure on consumption. Refill began 10 days earlier than usual, on March 20th, and storage levels have climbed 39% faster than the pre-pandemic five-year average. Elevated prices could promote continued rapid inventory accumulation.

An ongoing heatwave across Northern India is leading to rolling blackouts as power networks struggle to cope with the demand for cooling. Coal prices have responded strongly this week, with front-quarter API2 coal jumping 20% since Monday, helping to buoy the energy complex. Continental near-term gas prices have risen by 7% in response.

Date: Wednesday, 4 May 2022

UK energy markets were mixed but largely flat coming out of the bank holiday weekend, with slight declines in the front-end and fractional rises in the back-end of the forward curve. Russian gas flows to the continent are flat on yesterday, and fundamentals remain strong with slightly stronger wind power generation and Summer-time temperatures across the UK. Norwegian gas exports have recovered compared to last week (up 8%).

The world’s largest coal importer, China, saw thermal coal imports fall 31% year-on-year in Q1, the result of rolling lockdowns constraining economic productivity. Despite this, coal prices have doubled across the board so far this year, as the principal market mover remains the upcoming ban on Russian coal exports to Europe. China seeks to insulate its generators from high prices by increasing coal production by 10% this year, which will put underlying bearish pressure on the market.

The EU will publish plans today for an embargo on Russia oil. Bans on Russian crude will be phased in over the next six months and for refined products by the end of the year. As part of the sixth sanctions package, a further tightening of access to SWIFT will make payments on Russian energy increasingly difficult, further discouraging trade. Brent crude jumped $4/brl on the news to $108/brl.

Date: Tuesday, 3 May 2022

UK power slipped slightly across the forward curve on Friday, following losses on gas contracts of 2-3%. Beyond Winter forward markets were down from record highs, aided by positive sentiment on strong gas flows, but also fears of recession as data showed that the US economy unexpectedly contracted in Q1. This week sentiment is neutral/bearish, as strong fundamentals provide downward pressure, although the possibility of further sanctions and developments in Ukraine will create upward momentum.

In an about-face, German economy minister Habeck stated yesterday that Germany would be able to bear the costs of a full embargo on Russian oil – ideally phased in near the end of the Summer. Having now lost its major opponent, EU plans for a ban on Russian oil are expected this week, included within a new sanctions package. Russia supplied 26% of the EU’s oil last year.

The IUK gas pipeline outage has been extended until 7 May, limiting export capacity to 530GWh/d. This has helped propel the spot spread between UK NBP gas and Continental benchmark TTF gas to €60/MWh – a record high, despite increased flows via Ukraine which are up at nearly 1,000GWh/d this morning compared to levels of below 500GWh/d early last week. Continuing warmer than average weather forecasted for the UK will sustain high-levels of exports to the Continent.

Date: Friday, 29 April 2022

UK baseload for Winter delivery fell by 5% to £230/MWh yesterday as panic in gas markets rapidly cooled as it appeared Poland and Bulgaria’s Russian gas switch-offs were isolated incidents. The picture was more mixed along the forward curve, with the back-end seeing small gains of 2% after a week of losses. Volatility remains low, however, having dropped off markedly since the end of March as liquidity has improved in the front-end.

Weather forecasts for next week expect temperatures to rise to as much as 3°C above the seasonal average, cutting heating demand. However, wind-power generation is expected to remain low, which will offset some of the pressure-release on the gas market. Day-ahead prices are expected to remain in the current £140-170/MWh range, and power for delivery in June has dropped to £171/MWh from above £200/MWh two weeks ago. Without major news, such as an escalation of the war or a broad refusal to meet Putin’s rouble gas payments demand, near-term prices are likely to remain lightly bearish and at, or below, current prices.

Reuters yesterday reported that possibly more than five European buyers of Russian gas have already opened accounts for rouble exchange at Gazprombank and made payments. An emergency meeting of EU energy ministers on Monday will clarify which countries have taken advantage of the Gazprombank loophole, although they are thought to include Uniper (Germany), Eni (Italy), OMV (Austria) and Hungary. This threatens to wedge open divisions in the EU, with the EC President Ursula von der Leyen saying the EU will not do Putin’s bidding – despite some members already having broken ranks.

Date: Thursday, 28 April 2022

Prices on Winter 22 NBP gas rose by 5% yesterday, tracking gains in European markets which reacted bullishly to the Russian supply news but without spiking in front-month and beyond. This is partly due to the volumes involved being relatively small (as Poland and Bulgaria account for just 8% of total EU natural gas imports), and the sentiment favouring continued Russian supply as a necessity to fund it’s war effort. UK baseload for winter delivery jumped by 7% to £241/MWh, however the remainder of the forward curve was fairly static.

LNG imports remain strong in the coming seven days, with 7 cargoes totalling 8600GWh or 4 day’s supply at the present rate of consumption. The Continental TTF gas benchmark has continued to diverge from NE Asian JKM, with the spread reaching €27/MWh of gas during the current price spike. This has been aided by an ongoing outbreak of covid lockdowns in China, which won’t stop recurring in the mid-term so long as the Party maintains it’s compromised zero-covid policy, and strong storage levels in Japan.

In an attempt at divide and conquer, Russia has suspended supplies to Poland and Bulgaria while maintaining steady exports to Germany, already seen as soft on Russia. The move is expected to exploit the current divisions in the EU, where on the other side Poland is hardline against continuing imports of Russian energy. Germany is said to be preparing to pay Gazprombank to continue gas flows, however in the mid-term Germany does not appear wedded to Russian energy – instead focussing on shifting import origins as fast as possible without impacting security of supply.

Date: Wednesday, 27 April 2022

Front-end UK gas was sharply up, in-line with markets on the Continent, with Winter 2022 rising 50p/therm between close on Monday and early trading this morning, to reach 275p/therm. Bullishness was confined to near-term contracts, however, with 2023 baseload seasons falling 5% to the £160-165/MWh level, extending this week’s losses after a month-long bullish run. UK gas pipeline exports to the Continent were cut today due to a technical outage, sending the TTF-NBP spread soaring to €51/MWh. Flows are expected to resume tomorrow.

Gazprom briefly halted gas supplies to Poland and Bulgaria, stating that they had failed to pay in roubles. Exports to Poland have resumed at a low level of 80GWh/d, but European gas markets are jittery after Gazprom apparently informed PGNiG yesterday that it would terminate flows at 8am CET on Wednesday. Putin’s decree on March 31 that “unfriendly” countries must pay for Russian gas in roubles is expected to affect payments occurring in May onwards for gas delivered after the decree. Front-month TTF gas is currently trading 18% up on Monday’s close price at €110/MWh.

Spain and Portugal were granted permission by the EU to implement an average €50/MWh cap on the price of gas used in power generation for 12 months, expected to come into force from May, in order to shield consumers from volatility in gas markets. It has not been confirmed how the mechanism will work or how the interconnector price to France will be affected, although gas contracts in Iberia have edged lower on the news.

Date: Tuesday, 26 April 2022

UK baseload continued to edge lower yesterday, with the forward curve dropping by 1.5% across the board. The relative risk premium on Summer 2023 over Winter 2023 has faded markedly in the last month, with markets carrying forward current concerns over future energy supply from Russia into the long-term. Winter 2023 now trades at a £6/MWh premium to Summer 2023 (£175 vs £169/MWh), although sharply below the £217/MWh for Winter 2022, which is widely seen as a pivotal test for European energy independence from Russia.

Although Germany has already legislated minimum gas storage fill requirements for this year, the EU is now debating a deal to share out the costs of procuring gas for storage and implement similar requirements (80% fill this year) to Germany’s. The deal will involve countries without storage sites covering 15% of their annual consumption by filling the equivalent volume in states with storage. These measures will facilitate joint procurement of gas by EU nations in the future.

Easing Norwegian platform maintenance going into May will help loosen the UK gas system, which is tight this week on high gas-for-power demand and cooler weather. Norwegian exports to Europe are currently 10% down at 3,200GWh/d, and Russian flows via Ukraine are also down 300GWh/d month-on-month at 520GWh/d. These factors have not inhibited gas storage fill, which in NW Europe is now nearly at 30% of capacity, up from 21% a month ago.

Date: Monday, 25 April 2022

UK gas forwards were down slightly at close on Friday, with Winter 22 down 5% and the remainder of the forward curve down 2%. UK baseload largely followed gas but was more mixed, with a fractional gain on Winter 2023. The fundamentals outlook this week is poor, with wind power generation expected to average around 2 GW and temperatures across the country dropping below the seasonal normal until the weekend.

German newspaper Die Welt has suggested that the EU Commission will likely put forward proposals for a sixth sanctions package this week, which could include a ban on Russian oil imports. EU members will debate the package at a summit due at the end of May. Josep Borrell, the EU’s top diplomat, stated that even though there was no consensus among members for total energy sanctions on Russia he believes that eliminating Russian energy imports is going to happen eventually.

EU benchmark carbon prices were up at €88.99/tCO2 on Friday, their highest level since the crash in February. The moves were fuelled by strong German auction results, but may not last after a victory for renewables-supporting Macron and a renewed spread of lockdowns in China, which will put bearish pressure on global energy markets. UK carbon markets followed the EU’s, with front-December credits closing up 6% for the week at £82.55/tCO2 – about £37/MWh for a gas-fired power station.

Date: Friday, 22 April 2022

UK gas markets were up again yesterday, with uniform gains of more than 4% across the forward curve. UK baseload followed like-for-like, with Summer 2023 setting another record high at £174.6/MWh, while Winter 2022 rose to £228/MWh. API2 front-quarter coal dipped by 3% in response to carbon prices remaining at the €87/tCO2 level, and Brent crude is trading flat at $106/brl.

Despite being in the midst of a warmer-than-average April, the LNG import roster remains strong with the UK expecting six cargoes in seven days totalling 7680GWh or four typical Spring day’s demand. This is compensating for significant short-term outages in Norwegian gas production, which has fallen by around 640GWh/d due to maintenance works. Reduced Norwegian exports have also pushed the spread between NW Europe gas benchmark TTF and UK NBP spot above €34/MWh this morning, fuelling high pipeline exports of 620GWh/d from the UK to the Continent.

TTF has sharply diverged from the Japan-Korea Marker (JKM) in recent days, with the spread rising to €18/MWh as JKM falls away. Natural gas demand in Korea and Japan is down year-on-year, triggered partly by a mild Winter and partly by record high commodity prices causing demand destruction, with overall Asian LNG imports dropping 10% in Q1 2022 compared to Q1 2021. Covid lockdowns in China’s largest port, Shanghai, have not helped, leaving European buyers to hold sway over the LNG spot market – for now.

Date: Thursday, 21 April 2022

Prices continued to creep up by 3% to record highs across the forward curve for UK baseload yesterday, with the exception of Winter 22 which has remained essentially bound in the £210-240/MWh range over the last month. Front-season gas is up 3% in early trading this morning which could presage a similar move in power. Current bullishness in gas is driven by a sense that because EU sanctions on Russian oil are now being negotiated, Russian gas (the last and most crucial energy import) must be next.

In trading yesterday EU carbon prices jumped by nearly 10% to €87.82 after six weeks of stasis. The lack of an EUA auction may have focussed attention on futures, but gains came despite MEPs narrowly backing curbs on speculation in the EU ETS. API2 coal for delivery in 2023 responded with a rise of more than 4%, now trading at $245/t and close to the early-March peak of $261/t which occurred immediately after the start of the war in Ukraine.

After a flurry of supply deals across Africa, Italy believes that it could be independent from Russian gas by the second half of next year. Russia supplies around 35% of Italy’s demand, which is similar to that of the UK, making Italy the second most exposed nation to Russian supply in the EU bloc after Germany.

Date: Wednesday, 20 April 2022

UK baseload power closed down 2.6% yesterday thanks to stronger fundamentals and a lack of bullish factors dropping out of the war in Ukraine. The remainder of the forward curve for both UK gas and power was static, with contracts on the back-end pausing after a sustained bullish run. API2 front-quarter coal is trading 2% up at $318/t this morning, and front-December EUAs are flat at €82/tCO2.

Renewable power output will pick up across NW Europe from today, with a strong wind generation forecast lasting until Sunday. Ongoing above-average spring temperatures have dampened gas demand, boosting gas flows to storage. NW European aggregate storage has risen by 20 TWh in the last 12 days, and if fill continues at this rate levels will exceed 400 TWh by Oct 1st – close to the EU’s 80% storage requirement for that date.

Russian coal exporters are offloading as many cargoes as possible at European ports prior to the total EU ban in mid-August, with volumes at Russia’s main western export terminals up 7% on last month despite milder weather. Unlike trader’s reticence to buy Russian crude, which has seen European imports sharply drop, coal demand remains strong in Germany and the Netherlands – although imports are down when compared to February, prior to the start of the war.

Date: Tuesday, 19 April 2022

Front-end UK baseload fell by 4% in the front-end on Thursday, with Winter 2022 NBP gas driving bearishness after a daily drop of 10%. Contracts were flatter further along the forward curve, continuing the convergence between front-end and long-term energy prices. Front-quarter API2 coal rose to $321/t, and EU Dec-22 benchmark carbon prices remainder stuck at the €80/tCO2 level – the same as for the past six-weeks.

The French Finance Minister this morning said that a Russian oil embargo was being negotiated within the EU. The major holdouts are understood to be Germany and Austria, with France’s Macron a principal proponent. Brent crude was up 15% week-on-week yesterday, currently trading at $112/brl, aided by production outages in Libya and the reopening of Shanghai – which could be followed by eased Covid restrictions across China.

As power demand for cooling rapidly rises in the coming months across Asia, it is likely India will face persistent electricity shortages. The country is already suffering from frequency drop-outs, a sign of generation failing to meet demand, as temperatures across the 400 million strong Gangetic plain are already exceeding 40°C. India is expected to be fishing in international markets for additional coal supply, which could help buoy prices further, although it principally suffers from a lack of generation capacity.

Date: Thursday, 14 April 2022

UK gas and power markets were mildly bullish yesterday, with 2023 baseload seasons setting contract highs at the £166/MWh level and continuing a 3-week bullish trend. Front-quarter API2 coal closed at $321/t yesterday as the embargo on Russian coal begins to hit stockpiles. Oil is trading at $108/brl after two strongly bullish days, reversing two weeks of losses.

Germany aims to charter three floating LNG terminals with 79 TWh of regasification capacity available this year, ramping up to 285 TWh by summer 2024. These will help bridge the gap to the building of the country’s first land-based terminal as it tries to rapidly eliminate dependence on Russian pipeline flows by mid-2024.

Austrian Chancellor Karl Nehammer was reportedly told by Putin in their meeting this week that Austrian payments for gas could continue in Euros, despite Russian demands for Rouble payments. This potentially opens the door for the continuation of normal payments for Russia gas, assuaging concerns over non-delivery due to non-payment. Meanwhile, Italian state-controlled Eni has signed a gas production and LNG supply deal with Egypt, worth up to 31 TWh this year.

Date: Wednesday, 13 April 2022

Front-end UK baseload was once again flat yesterday, and prices for Winter 2022 (£229/MWh) continued to converge with Summer 2023, which rose by 2.5% to £161/MWh. Front-quarter API2 coal was sharply up by 6.8% at $314.5/t, as was Brent crude which jumped by $6/brl to $104.6/brl at close yesterday after the IEA reported that Russian output losses would double in May thanks to reticence on behalf of European buyers.

After a visit to Ukraine, key German lawmakers are calling for an EU ban on Russian oil, despite warnings from Germany’s leading economic institutes of recession if there are further sanctions on Russian energy. Germany is the major hold-out in the EU hampering the drafting of tighter sanctions, with voters concerned over the exposure the country has to Russian energy supply.

France is reportedly considering plans for a full nationalisation of debt-laden EDF, owner of Hinkley Point C, which include the possible sale of it’s renewable arm to drum up cash for it’s nuclear business. EDF has been in difficulty since projects using it’s new EPR reactor design – including the 13-year delayed Finnish Olkiluoto-3 and Hinkley C – have faced repeated delays and cost over-runs, compounded by an apparently widespread pipe corrosion problem discovered in several French reactors earlier this year. Nationalisation could see a scaling-back in the number of projects abroad for Europe’s foremost nuclear reactor business.

Date: Tuesday, 12 April 2022

Front-season UK power and gas contracts continued their gradual divergence from the rest of the forward curve yesterday, with Winter ’22 baseload falling 1.3% to close at £229/MWh despite increases of 3% on seasons further out. Winter remains at a significant £72/MWh premium to Summer ’23 baseload, however. In the absence of news of major new sanctions energy markets will continue the trend of last week today and remain fairly steady.

The EU is drafting proposals for a possible oil embargo on Russia, although no agreement has yet been reached. Separately, the European Commission is also looking at targeting imports of Russia crude with intention to pressure Russia into halting the shelling of Ukrainian cities. Both these factors are placing underlying bullishness on energy markets which are currently being pressured by an increasingly rampant Covid epidemic in China. Oil was up at $100.23/brl this morning.

As LNG imports to the UK continue at pace the spread between spot NBP (UK gas hub) and TTF (benchmark NW Europe hub) prices has increased, reaching €20.83/MWh yesterday. The UK is currently expecting 8 shipments of LNG by Easter Monday, totalling 8,500GWh or about 4 typical spring days’ demand, which will continue to fuel high pipeline exports to the Continent.

Date: Monday, 11 April 2022

While front-season UK power and gas contracts were flat on Friday, forwards for 2023 were up more than 4%, bringing prices more inline with those for Winter 2022 on the expectation of supply pressures remaining. API2 front-quarter coal was up 5.7% to $296/t (a two-month gain of $160/t or 218%), while Brent oil is currently trading flat around $100/brl at the level of Wednesday/Thursday last week.

Temperatures across the UK will be as much as 3°C above the seasonal average this week. By Wednesday the wind power generation is expected to fall to below 2GW and remain at that level across the forecast. Gas-for-power demand will therefore be up this week, but more than offset by lower domestic heating requirements.

The EU has launched a platform for EU Commission and country representatives to pool member’s gas demand and co-ordinate talks with suppliers. Italy has managed to secure additional flows from Algeria, and there are suggestions of an EU deal with Israel, which exports LNG via terminals in Egypt. The Commission also indicated that the platform will support hydrogen buying, reflected in EU climate chief Frans Timmermans comments as he laid out a revisit to the EU’s 2030 renewable target with intention of increasing it to help eliminate dependence on Russian energy.

Date: Friday, 8 April 2022

Winter 22 NBP natural gas fell by 2.4% yesterday thanks to warm temperatures and strong winds, and no major developments in Russia’s war. This also meant that the remainder of the gas forward curve was fairly static, and power markets were similar with UK baseloads forwards moving less than 1% in both directions. Carbon was the biggest gainer yesterday, with UKAs for expiry in Dec-22 closing 5% up at £76.28/tCO2 after strong auction results.

In global LNG markets developments in Europe remain the dominant market driver. This has not stopped Asian demand however, with the spot market spread between the Japan-Korea Marker and NW Europe’s TTF hub having once again narrowed below €0.50. As the spread has narrowed since mid-March, the European and Asian markets have been trading places as the most attractive destination for LNG cargoes. However, momentum could swing firmly towards the east, as European demand slows but demand for cooling in Asia begins to rise as summer weather hits.

Global energy markets continue to face downward pressure from spreading lockdowns across China, as the government continues to hew to it’s zero-Covid policy. Facing the highly-infectious and cryptic Omicron variant, it seems unlikely that the virus will be completely eradicated once more. It appears the party may have little choice, however, as vaccination rates are poor among the elderly – just 82% having had two doses – and the vaccines used (such as Sinovac) show much poorer efficacy, raising the possibility of a renewed spike in deaths unless the outbreak is controlled.

Date: Thursday, 7 April 2022

UK wholesale baseload forwards were static in the front-end yesterday, but further out minor gains of 2-5% occurred as the prospect of import bans on Russian energy to western countries appeared likely to be prolonged. In a bid to cool global oil markets, IEA member states agreed to release 60m barrels of crude oil in addition to the US’s commitment of 180m barrels over the course of the next six months. Brent crude dipped below $102 in response.

The EU’s ban on Russian coal imports will not take full affect until August, with an extension to the wind-down period pushed for by Germany. Additionally, it isn’t clear whether the ban will affect only new contracts or existing ones also, which could enable Russian imports to continue well after the ban is emplaced. Gains in front-quarter API2 coal stalled yesterday, losing $1/t to close at $292/t.

The global coal market is tight, with the world’s largest exporters, Indonesia and Australia, having hit their production limits already meaning that the additional demand for supplies in Europe will likely go unfulfilled. Russia’s exports of coal to European destinations have declined by 12% since the start of the war, which helped send front-quarter API2 briefly above $450/t. European governments are maximising coal-fired generation capacity, which despite increases in the fuel price remain more cost-effective than gas.

Date: Wednesday, 6 April 2022

While front-season UK baseload hardly budged yesterday, 2023 seasons climbed by more than 4% to £141/MWh, dragged up by a rise in 2023 NBP gas of 8% (although gas markets remain illiquid). Brent crude remains at the $108/brl level, with expected supply impacts from sanctions on Russia balanced against slowing demand recovery.

The EU plans to ban the import of Russian coal as part of the 5th package of sanctions on Russia, worth about €4bn annually. Front-quarter API2 coal jumped by $40/t to $290/t in response. Additional bans were proposed on raw materials including wood and cement worth €5.5bn and the Commission is working on sanctions on imports of Russian oil, with European Council President Charles Michel stating this morning that “… measures on oil and even gas will also be needed sooner or later”.

European gas stocks ended winter slightly below normal but much higher than was expected four months ago. Storage levels in NW Europe reached their nadir on March 18th at about 20% of total capacity, thanks to high prices which both encouraged imports of LNG and discouraged usage, as well as to mild weather. Gas prices are expected to remain at elevated levels, particularly when compared to a year ago, attracting LNG cargoes and aiding storage top-ups.

Date: Tuesday, 5 April 2022

Winter 2022 UK baseload had fallen by 5.3% at close yesterday as it appeared that the recent cold weather was essentially behind us, despite a brief cold spell expected for the end of the week, and fundamentals in the UK are softer this week  – with broadly milder and windier weather expected to continue and temperatures predicted to rise into next week. Front-end gas was steady, although fair value for the back-end rose by up to 5% on long-term supply concerns.

The spread between Continental TTF gas hub prices and UK NBP hub has risen to €15.22/MWh on spot, the third highest on record, fuelling high UK exports of 612GWh/d to the Continent. This is largely down to strong LNG receipts at UK terminals expected to continue in the coming seven days with seven cargoes totalling 8360GWh, or about five Spring day’s demand in the UK. The dominant origin of cargoes is the USA.

The EU is considering further sanctions on Russia after apparent war-crimes in previously Russian-occupied areas, causing Brent Crude to jump by $4/brl to over $108 this morning. While Germany remains staunchly opposed to a ban on Russian gas, Italy moved by saying it would not veto an EU-wide initiative. France suggested a compromise could involve hefty tariffs on Russian gas imports, pushing the market to favour alternative supply.

Date: Monday, 4 April 2022

Natural gas prices fell on Friday, with Winter-22 NBP falling from 298p/therm to 265p/therm as fears of a Russian supply cut ebbed. EU Dec-22 benchmark carbon prices finished a third consecutive trading week at remarkably steady levels, having hardly moved from the €76-80/tCO2 range after recovering from a major dip in early March.

Despite the issuing of Putin’s roubles-for-gas deadline on Friday and Europe’s refusal to comply, Russia did not cut flows. Russian flows to NW Europe this morning are slightly up on last week. Meanwhile, the Baltic states became the first to completely sever gas imports from Russia, instead relying principally on gas storage.

Members of the IEA on Friday agreed to join the US’ largest ever 180 million barrel oil reserve release, but without confirming the volumes involved. After failing to bring partners in the Gulf onside, the Biden administration has authorised the release of 1m bpd for 6 months in an effort to put sustained pressure on a strong oil market.

Date: Friday, 1 April 2022

NBP and TTF gas markets rose yesterday on lower temperature forecasts and uncertainty on Russian gas payments. This morning see gas continues to flow, and the market is steady to where it settled yesterday.

Uncertainty over Russian gas payments in Roubles remains the major risk to the European gas market. Yesterday saw Putin announce that, from today, Europe will be expected to pay for Russian gas in Roubles – else it would cease deliveries. So far, the response remains that Europe will continue sticking to the contract terms (which state Euros or Dollar payments).

Robust LNG deliveries have been declared to NW Europe, and solid LNG sendout over next week is still foreseeable. A bearish move across oil (after the Biden Administration announced the largest ever release of oil reserves) coupled with marginally higher French nuclear availability next week might provide some bearish direction to European gas prices.

Date: Thursday, 31 March 2022

Summer 2022 NBP gas rose by 8.5% yesterday as it neared delivery. Beyond 2022, the gas forward curve saw falls of 2-3%. After the Biden Administration announced the largest ever release of oil reserves – 180 million barrels – oil for delivery in June dropped from $111.44 at close yesterday to as low as $105.12 this morning.

The Kremlin commented yesterday that Russia will not have a mechanism to take payments for exported gas in roubles ready immediately as more time would be needed to develop such systems. Proposals for these systems are expected today from Gazprom and the Russian central bank. Russian flows via Ukraine and Nord Stream are flat this morning, with flows via Poland up slightly.

The Russian newspaper Kommersant has reported that Gazprom is studying options for halting gas flows to Europe and evaluating the potential fallout, feeding fears of a choke on supplies. The Dutch and German governments have launched campaigns requesting citizens and companies use less gas, for example by turning thermostats down by 2°C – an idea floated by the IEA earlier this month, which could save 13% of the gas EU members buy from Russia.

Date: Wednesday, 30 March 2022

Energy markets were mixed yesterday, with limited moves in both directions occurring across the complex. Front-end gas, coal, power and carbon made minor gains, while oil and back-end power and gas fell off by just over 1% as traders assessed the direction of peace-talks as positive. UK military intelligence is sceptical, however, citing zones where Russia said it would scale back operations as those where it was already being pushed back. The country is likely re-assessing it’s war aims in a pivot to concentrate on the Donbas region.

Germany today declares an “early warning” of a possible gas supply emergency, activating the first of three stages in the country’s gas emergency plan. This requires an evaluation of further actions which could be undertaken to improve the security of supply. This move reflects concerns the supply situation is more likely to deteriorate than improve in the short term and in the long term competition for natural gas will increase.

The speaker of Russia’s lower house of parliament has suggested that demand for payments in roubles could be broadened across the breadth of exported commodities from fertiliser to timber. As the largest exporter of raw materials globally, such a move would place intense inflationary pressure on the global economy, increasing the looming likelihood of recession at the end of this year.

Date: Tuesday, 29 March 2022

2022 UK baseload rose just over 3% yesterday, although sentiment was more mixed across the remainder of the forward curve. Temperatures in the UK are expected to plunge to nearly 4°C below the seasonal average in the coming week, although this will be matched by a return to normal for wind-power generation, reducing gas-for-power demand. Oil prices fell by $8/brl to $112.48/brl, and coal prices were flat.

After G7 ministers refused Putin’s demand for rouble-only payments on gas on Monday, citing the move as a breach of existing contracts, Russia said flows would stop if payments were not forthcoming. Proposals for solutions to rouble gas payments are expected from the Russian central bank, the government and Gazprom by Thursday. It seems likely that the end-result of Putin’s move is reduced flows of gas to Europe at higher prices by forcing older more favourable fixed-cost supply deals to be torn up, a geopolitical victory for the Kremlin – less gas for more money.

As China hews to an increasingly difficult zero-Covid policy, lockdowns are spreading across the country with the latest affecting 26-million strong Shanghai. This is having a strong impact on oil demand in the world’s largest importer of crude, going some way to offset the 1 to 3 million bpd supply drop from sanctions on Russia. Despite attempts to contain the virus, infections are expected to sweep the country in the coming weeks likely causing major economic pain if the central government refuses to fall back to a mitigation strategy.

Date: Monday, 28 March 2022

Gas markets fell back on Friday after a jump mid-week, with NBP 2022 seasons falling more than 8%. Summer 2022 UK baseload heads into its final couple of trading days at £213/MWh, and Winter 2022 hovers similarly at £215/MWh. Russian flows this morning are flat, and the LNG import roster holds a strong supply of 8 ships in the coming week totalling 9,500GWh or around five typical Spring days’ demand.

Last week the EU Commission tabled a mandatory certification scheme of gas storage owners in Europe, a direct response to a lack of storage additions in 2021 by Gazprom, which controls around 20% of NW European capacity. To incentivise filling of storage, tariffs on exit and entry to storage have been eliminated, factors which will help the EU reach it’s 80% storage goal by October 1st. On Friday German lawmakers approved legislation mandating 90% storage fill by Nov 1st.

Despite accusations of wide-spread speculative investing in the EU ETS, the EU’s securities watchdog found only small net investment fund positions, principally held in the UK and US by companies taking part in high-frequency algorithmic trading. Tighter controls were recommended, however, as monitoring and transparency on trading is limited. Front-year EUAs soared from below €40/tCO2 to €97/tCO2 in the year to February, before crashing down to €58/tCO2 in early March.

Date: Friday, 25 March 2022

UK gas forwards for 2022 dipped by 4% yesterday, although the picture was more mixed across the remainder of the forward curve, as European leaders once again declined stricter sanctions on Russian gas. Front quarter coal steadied around $280/t after gaining 17% from the start of this week, and oil retreated from $122/brl to as low as $115.80 in trading this morning, as it appeared that exports would be able to continue from one of the berths at the storm damaged black-sea CPC terminal.

The EU and US unveiled an LNG supply deal today for an additional 15 bcm in the remainder of 2022, equivalent to about 20% gas flows from Russia if they continue at the year-average rate. The long-term objective is to secure an additional 50 bcm (about 50% of year-average Russian flows) per year. The deal comes at the end of three days of summits among EU leaders which also produced a joint gas procurement plan for this year.

On Thursday the German utility association BDEW, representing the Continent’s major gas buyers, said that “There are concrete and serious indications that the gas supply situation is about to deteriorate”. It cited two likely outcomes from Putin’s roubles-only payments demand on Wednesday: that European customers decline and risk getting no gas, or that they comply and accept higher prices as contracts are renegotiated and cheaper long-term deals scrapped.

Date: Thursday, 24 March 2022

Putin yesterday announced that all gas sales to “unfriendly” countries must be paid in roubles. In effect, this means that Western buyers of Russian gas will be supporting the currency that sanctions have done so much to damage. However, it will negatively impact Russia’s ability to service foreign debt dominated in dollars and euros, which together accounted for 97% of the payment currencies for gas flows in January.

UK gas markets were up by over 15% for 2022 seasons yesterday after Putin’s announcement. Supply is strong, however, with the LNG import roster packed thanks to shipments drawn westward by the price-spike, with UK terminals expecting 10 cargoes in the next 9 days, totalling 11,400GWh or about 7 days of typical spring gas demand. Russian flows are static, and a 20p/therm premium for TTF gas over NBP is keeping pipeline flows from the UK to the Continent high at 440GWh/d.

Oil pipeline flows from fields developed by Western majors in Kazakhstan have been cut due to “storm damage” at loading facilities on Russia’s Black Sea coast, with maintenance taking up to two months and reducing exports by 1 million bpd. A Kazakh official commented that Kazakhstan and Russia would find ways to re-route oil if the suspension was prolonged. In January, Russia sent troops to help the embattled Kazakh President Tokayev quash protests, and the two countries on Tuesday agreed to work towards boosting oil transit to China.

Date: Wednesday, 23 March 2022

Gas markets rallied slightly yesterday, with gains of ca. 3% across the forward curve, after a week of heavy losses fuelled by difficult but apparently productive Russia-Ukraine negotiations. Front-year API2 coal made the greatest jump, up 10.6%, as traders hedged the likelihood of a European ban on Russian coal.

NW Europe’s gas storage levels have been flat over the past fortnight at around 20% of total capacity, as warm sunny weather has offset increased gas-for-power demand resulting from low wind generation. Winds are not expected to pick up until Wednesday next week just as temperatures will plunge sharply to 4°C below the seasonal average.

As President Biden visits Europe for a Nato summit today, pressure from the US for an embargo on Russian oil exports looks to yield little fruit. The unity of EU members shown after the start of the invasion has begun to crack, in part thanks to Germany’s reticence towards energy sanctions, as the Russian invasion has stalled – although a further outrage in the form of a chemical or biological weapon attack could push the bloc to bite the bullet and impose strict bans on energy exports.

Date: Tuesday, 22 March 2022

Despite some bullish signals yesterday, the markets didn’t show strong reactions. In fact there were bearish movements in the shorter-term gas and power markets (e.g. day-ahead, Sum-22 and Win-22), likely taking direction from the Dutch TTF front-month contract, which closed below €100 for the first time since Russia commenced it’s assault on Ukraine. This morning flows are looking steady and the markets have opened level to yesterday.

Gazprom did not book much capacity to flow gas into Europe for April in the monthly auctions. This move could be pre-guessing sanctions that will come soon or could be due to EU buyers not giving buy orders for April. Either way, this could make it harder to meet storage demand.

Japan is scrambling to keep the lights on in Tokyo as a result of cold weather and power plant outages from last week’s earthquake, which suggests that they will be needing strong LNG supply. Japan is a major LNG demand centre and European markets will be looking out for the potential re-routing of LNG flows at a time when Europe also need robust LNG supply as they look to reduce reliance on Russian gas.

Date: Monday, 21 March 2022

Gas flows are looking stable this morning and today’s early trading activity is showing small downward movements since prices closed on Friday. Despite some upward price movements in gas prices on Friday, both gas and power prices recorded a net downward movement over the course of the week as concerns over Russian supply were counter-acted by a milder weather forecast and high LNG arrivals.

The markets will be awaiting the results of the monthly capacity auctions being held this morning. Results (due at 11am) could push the markets in either direction depending on whether there are any Russian gas flow bookings for April.

Carbon prices failed to break through the €80/tCO2 mark last week and today have opened 1.3% down at €77.84/tCO2. Today’s latest weather forecast sends a bullish signal to carbon prices due to forecasts of low wind power output across much of Europe this week (which could boost fossil power generation and corresponding EUA/UKA demand), but this week’s warmer temperatures could offset some of the effects.

Date: Friday, 18 March 2022

UK power and gas prices saw some bullish movements yesterday, taking direction from European gas prices which were lifted mostly by reduced Russian supply via Nord Stream pipeline yesterday. This morning has again seen Nord Stream 1 pipeline flows decline in line with nominations, while reverse flows on the Yamal-Europe pipeline eased and nominations for pipeline flows via Ukraine increased.

The EUA Dec-22 contract broke above the 100-day moving average yesterday, closing at 79.68 Eur/tCO2, but struggled with the 80 Eur/tCO2 resistance level in yesterday’s session. After several days where the 100-day moving average has limited the carbon price, prices closed above this level yesterday and this could suggest further room to the upside.

Oil prices have extended their gains this morning at the end of a third volatile week of trade after slim progress in peace talks between Russia and Ukraine raised the possibility of tighter sanctions and a prolonged disruption to oil supply. Brent crude futures rose $0.82, or 0.8%, to $107.46 a barrel this morning, after surging nearly 9% on Thursday in the largest percentage gain since mid-2020.

Date: Thursday, 17 March 2022

Yesterday saw a dip in power and gas prices across the curve, led by downward movements in day-ahead prices on continued bearish sentiment – driven by the reported progress in the peace talks held between Russia and Ukraine. Mild weather combined with quick LNG cargo arrivals and steady send-out is also expected to mitigate the upside over the coming days.

Prices yesterday were also reacting to news that Norway will boost its natural gas output in the coming months by postponing some maintenance and making other adjustments together with pipeline operator Gassco. They will keep production higher than normal through the summer and deliver bigger volumes to Europe at a time of shortages and soaring prices.

Brent crude has gained $3/brl (3.1%) to $101.09/brl this morning after falling for three consecutive sessions. This comes as the International Energy Agency (IEA) said markets could lose three million barrels a day of Russian crude and refined products from April.

Date: Wednesday, 16 March 2022

UK power forwards were largely flat yesterday as the market weighed the potential for peace talks to progress – news this morning has Russia indicating that some parts of a peace deal are close to being agreed. Coal prices continued to slide by 6%, while the rally in carbon prices stalled with EUAs for Dec-22 closing fractionally down at €77.43/tCO2.

Gas deliveries by Gazprom outside the former Soviet Union have fallen by 28.5% annually so far this year as buyers shun new contracts and flows via Poland and Ukraine have been broadly low but highly variable. Concerns over the reliance on gas has pushed the UK to investigate extending the lifespan of Sizewell B, the youngest nuclear power plant in the country, by up to 20 years – as well as increasing North Sea oil and gas production.

According to the German economy minister Robert Habeck, Germany aims to halt imports of Russian coal from the autumn. Russian coal accounted for more than 70% of hard coal imports in Germany last year, and hard coal variably provides between 10-15% of power generation for Europe’s largest economy. These imports will have to be replaced with alternative seaborne supplies, as despite being a major producer Germany mines only poor-quality lignite, which is unexchangeable with hard coal in powerplants.

Date: Tuesday, 15 March 2022

Markets dipped further yesterday as traders took early Ukraine peace-talks as a bearish signal. 2022 seasons in UK baseload dropped by 10%, with smaller falls occurring across the forward curve. Brent crude is trading at $100.44/brl, a fall of more than 25% from trading last week.

Self-sanctioning by Western buyers, which was previously expected to start hitting in April as March cargoes would largely have been booked, has already begun to show in Russian exports of coal, oil and LNG. Coal has seen the sharpest drop, with cargoes of 1.16 million tonnes expected to Europe in the first two weeks of this month (compared to 3.37 million tonnes in February and 3.88 million tonnes in January). LNG shipments have followed, as data shows no cargoes of LNG awaiting loading, and shipments of crude oil to Europe have halved.

Oil and gas production in the Texas Permian is due to rise to a record high in April, 18 months after major operators were pulling out of the shale oil basin due to crushingly low prices. In the US’ NE Appalachian basin gas production will also hit a record high, and the number of new wells drilled is currently the highest since March 2020. These changes reflect American oilmen maximising the output of existing fields, taking advantage of a globally tight oil market, but will not be sufficient to replace Russian crude and LNG shunned by European buyers.

Date: Monday, 14 March 2022

UK natural gas for summer delivery was up 18p at 306p/therm on Friday, but has dropped to 270p/therm in early trading this morning. Power prices followed gas, although the potential for serious negotiations between Ukraine and Russia after progress over the weekend has signalled bearishness today. Oil is down at $108.80 as hopes for a shorter disruption to Russian supply have dented buying pressure.

NW European gas storage curve has flatlined since last Wednesday as relatively mild weather prevailed and wind power generation operated near capacity. Temperatures will remain up to 3°C above the seasonal average for much of this week, although wind power output will be lower and variable compared to last week, making it likely that there will be further minor declines in storage volumes.

European nations are split on banning imports of Russian energy, with Germany, Hungary and Bulgaria firmly against the prospect due to high dependence on Russian exports. Poland is staunchly in favour – despite the enormous impact such a ban would have on former eastern-bloc economy, where 55% of gas imports originate in Russia. The remainder of EU members are on the fence or open to sanctions, the likelihood of which appears low in the next week.

Date: Friday, 11 March 2022

Gas markets fell further on Thursday, with Summer 22 dropping 19%, as traders priced in a lower likelihood of sweeping energy sanctions on Russia from the EU. Power markets followed, with 2022 seasons losing 10% and 2023 between 3.5-5%, aided by a 20% fall in coal prices. These moves came despite a 7.5% jump in UK carbon prices, signalling expectations that higher coal burn will offset moves to decrease gas consumption.

Oil is trading up at $112/brl this morning, after falling sharply on the UAE’s suggestion of increasing output on Wednesday. OPEC and its allies have struggled to raise output to meet even modest increases each month, and it seems doubtful that the core alliance would be able to increase supply fast enough to replace lost Russian volume in the short to mid-term.

As the total number of U.S. LNG cargoes shipped to Europe in a quarter reached a record of 164 for the first two months of 2022, the Biden administration shelved an interagency review of ways to boost LNG exports to Europe. Pressure from the administration’s climate team reportedly was behind the move, driven by concerns over the carbon cost of building new LNG terminals and increasing natural gas extraction which is notoriously leaky process, releasing significant amounts of the powerful greenhouse gas methane into the atmosphere.

Date: Thursday, 10 March 2022

Brent Crude oil fell by 13.2% yesterday to $111/brl, the largest drop seen since April 2021. This was mainly driven by the news that OPEC through the UAE would pump more oil into the market, as Russian sanctioned oil becomes less palatable.

As the gas system opened up long, day ahead prices also fell yesterday from the highs of 520p/therm on Monday to 342p/therm on Wednesday. Pressure across the curve was seen with bearish sentiment coming from Opec, better storage, and continued strong LNG imports.

UK power followed the gas market with day ahead dropping to £318/MWh, strong wind output and good flows of gas with slightly milder weather are causing some risk premia to come out of the short term market. It is interesting to note how correlated Summer 22 is to day ahead. Carbon broadly flatlined on Wednesday with latest auction prices trading at £62.2/tonne

Date: Wednesday, 9 March 2022

Gains in power prices stalled yesterday, with Summer 22 baseload falling 2.8% and 2023 seasons down 7%. This came despite gains of 24% to €72/tCO2 in EU carbon from close on Monday, although UK carbon prices remain flat at the £69/tCO2 level. Gas markets are in a holding pattern ahead of announcements by the EU, although a minor retreat could occur as major EU economies do not yet look set to follow the US in announcing sanctions on Russian energy.

The 25 members of the IEA are co-ordinating an oil reserve release of 62.7mnbrls, more than the 50mbrls released by the US in November. This release is expected to a have a limited effect on oil’s bullishness, however, as it will only temporarily abate the shortfall from banned Russian imports and stranded Russian cargoes unable to dock in Europe. Brent crude closed yesterday at $128/brl, up more than 20% week on week.

The Philippines and Vietnam will open their first LNG import terminals in Q3 and Q4 this year, increasing the number of buyers in the Asian market, and China will also add more regasification capacity. However, demand growth in Asia is expected to slow to 2% this year from 8% in 2021, due to record pricing, while European LNG demand is expected to spike by at least 20% reflecting an appetite to pay a premium on LNG to avoid using Russian gas.

Date: Tuesday, 8 March 2022

UK 2022 and 2023 gas markets were up more than 12% yesterday, pushing baseload power prices up by 7-18% in the front-end, although seasons from Winter 2024 onwards saw declines of 6% or more. Market participants are hedging on expectations that dependence on Russian fuels as well as potential caps on their export will have been reduced markedly by that point, lessening the threat of energy shortages, although an expected EU pre-winter gas storage fill mandate is pushing summer pricing above winter.

A summit of EU leaders this week will agree to phase-out Russian gas dependence, alongside a raft of energy policies which when published in full will give markets direction. The EU today will outline a plan to cut Russian gas imports by two-thirds within a year, but the proposal will rely on historically unreliable curbs to domestic energy usage, such as lowering thermostats and improving insulation. Winter 22 TTF gas closed at €144/MWh yesterday, up from €79/MWh a fortnight ago, with sentiment bullish.

The US is willing to move ahead on a ban on Russia oil without the participation of European allies, after the leaders of France, Germany and the UK appeared lukewarm to the idea. Russia’s response was to suggest that gas taps could be turned off just as easily as a ban emplaced, potentially fuelling rapid price rises and causing further demand-destruction in energy-intensive industries such as raw material and car production., a

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