European gas and power markets have seen considerable value erode since the start of the year, with risk premium being priced out after scarcity fears didn’t materialise, whilst the forward outlook also improved.
- European demand was seen far lower as sharp demand destruction and a mild winter limited heating requirements. Gas demand destruction was seen over 15% across key demand hubs, whilst German temperatures also averaged over 1.5 degrees above normal.
- The supply situation also out-turned far better than feared, with French nuclear availability improving towards the back end of 2022, Norwegian gas outages limited and LNG deliveries remaining strong amid low Asian demand. LNG delivered c.100bcm to Europe over W22 (c.28% higher than W21).
As a result, EU gas storage ended winter at c.626TWh (55% full), far above expectations and significantly easing concerns over filling up storage ready for W23. However, the market situation could have been far different if we saw a cold winter or higher LNG competition with Asia.
Risks remain for next winter, as gas storage will only be able to refill to a certain level, whilst Europe will have to compete with Asia through the high demand months to maintain a stable source of supply.
With continued volatility across the energy complex, I’m sure you are wondering how you can stay on top of the wholesale energy price as it changes, especially in uncertain times like these?
Energy is a complex business, but hopefully we can make it simpler. You can keep informed on the changing prices through us at EDF. Join our free bi-monthly webinars on the UK Power Market with James Chaplin, Senior Manager of Curve Trading at EDF
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