Pricing worries ease, but geo-political tensions continue.
Pricing easing
At the end of Q1 2024, we have seen pricing on wholesale Energy Markets continue to ease as key factors continue to improve from the heights of the Crisis.
European Gas storage is strong somewhat ahead of recent years of the energy crisis, domestic wind generation continues to improve outpacing slight increases in Gas pricing. The price of Gas whilst still double pre-crisis levels, there are early signs of easing & stability returning to markets in 2024 so far.
Competition for LNG
However, key market risks are not going away. The demand for LNG supplies which sees cargo ships criss-cross the globe to find the best price still mean European and Asian markets are still very reliant on gas a key generator of electricity. Recent indicators suggest that gas demand and prices have been ticking upwards in Asia of late and European buyers will need to remain competitive throughout refilling season to reach EU mandated storage target.
Geo-Politics
There are several wears raging in the world now which are an obvious concern. The war in Ukraine passed its second anniversary in the Quarter, with no immediate sign of a ceasefire or resolution. Energy continues to be a key weapon in this conflict and energy infrastructure has been a regular target there. The fear of the spread of war throughout the Middel East is very real. This could further impact trade along the Suez Canal route.
International trade routes / Climate change
As well as the Suez Canal route, another key route for international cargos is the Panama Canal. This is arguably a more critical route for the supply of LNG to Europe, as a large volume of US cargos pass through the canal every year. Drought, linked to climate change, saw water levels in the Panama Canal fall drastically in 2023. Daily crossings through the canal have fallen by more than 30%. Operators hope that traditional wet season rains, usually beginning in May, will bring the levels of rainfall needed to take daily crossings back to full capacity.
Renewables key for growth
Wholesale energy prices remain at least 1.5 times the levels of 2020 and perhaps the new norm is at these levels. Accelerated investment in renewables is key to meet the growing demand for clean green electricity to support economic growth. Early reports show that 25% of European generation is via Wind and Solar, with 40% from Wind in Ireland. However, Solar has someway to catch up in Ireland.
