Average power in April retreated from the historical March high. Prices dropped by 25% on March.
Prices decreased as markets became accustomed to changing fundamentals of the gas market.
Gas was bearish in April
- Gas prices were bearish throughout April, but rapidly descended from mid April onwards.
Markets have calmed somewhat since then for the following reasons:
- Fundamentals of gas market have not changed: Gazprom’s YTD production up 1% on same period in 2021. Market now accustomed to lack of clarity on Gazprom deliveries.
- Liquid Natural Gas (LNG) continued it’s record breaking delivery schedule in April, breaching the record in January.
- LNG and mild weather continued to help the European storage situation, bringing storage within historic averages.
- Gas prices very volatile since war began.
- Initial spike, calm as deliveries Westward continued, spike to 500p/th, dropped again on peace talk hopes, rose to 300p/th on standoff over payments in Rubles.
- Markets have fallen since as Ruble standoff was by and large bluff and not expected until mid May at least.
- Market caught unawares by Bulgaria and Poland cut off – but has shrugged it off – SO FAR.
- EU/US announced 15bcm (increasing to 50 bcm) LNG deliveries to Europe, as Europe weans off Russian gas.
- Centralised EU procurement of gas commencing.
Renewables in line with March
- April was similar to March with renewables contributing just over 1/3 of the generation Mix.
Outages in Irish power plants increased slightly
- Outages have increased on Jan and Feb lows, but continue at a reasonable level.
- Hopefully, 2021 Capacity Crisis will be averted
What’s ahead for the next 12 months?
- Power Forward prices coming off March high as markets get more certainty on commodities.
- The breakout of war, European sanctions and markets fear of further sanctions against Russian energy exports has increased the risk premium in forward pricing.
- That premium will remain while the uncertainty of the Ukrainian situation remains.
Key drivers for forecasting
- Geopolitical situation in Ukraine – Negative
- Weather – Mild winter – Storage hasn’t been depleted as feared – Positive
- Pent up demand for and EU Mandated storage levels will impact Gas Summer refilling season – will support prices – Negative
- LNG deliveries will remain strong – US key source – Positive
- Moral and Political demand for sanctions on gas and oil – Negative
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