Market Analytics

Short Term Gas Contracts Off Lows on Supply

• Ukraine grid operator stopped receiving gas at key pipeline entry point.
• Gazprom PJSC said, “it can’t reroute supply to alternate hub location”.
• European spot TTF and UK NBP gas contracts moved higher on Tuesday on the back of this news after a week of losses.
• The benchmark front month TTF contract then erased some of these gain to trade 1.5% lower at 97.40 euros MWh on Wednesday morning.
• Ukraine’s gas network operator had said late Tuesday it would stop receiving the fuel into the Sokhranivka gas hub.
• This is the first time the war in Ukraine has disrupted gas flows to Europe via the country.
• Gazprom PJSC had been flowing normally through both entry points despite the conflict.
• Major European buyers are still facing end of month deadlines for Russia’s demand to be paid for gas in Rubles.
• New Stream see weaker market fundamentals but expect price volatility to continue in the short term.

Germany secures four floating LNG terminals in rush to replace Russian gas

• The first terminal will be operational in Wilhelmshaven before the end of the year.
• Germany’s Federal Cabinet has given approval to legislation to cut the approval process for LNG terminals to a 10th of the usual time.
• With fewer hurdles to clear, the LNG terminals, which would normally take years to build, could all be installed by end of Q1 2023.
• More onshore terminals are also in the early planning stages.
• Wilhelmshaven LNG terminal will have an import capacity of over 5 billion cubic meters.
• Floating Storage and Regasification Units (FRSUs) are a quick way of building up additional LNG import capacity.
• EU states seeking to reduce reliance on Russia.

UK Power and PPAs

• Gas is still the big driver of PPAs and UK power.
• Price volatility returns at the front end of the curve.
• Wind Generation is high and power markets look well supplied.
• Increased LNG and gas supply had moved UK pricing lower.
• Higher wind generation has decreased spot market pricing levels and volatility.

Key Drivers:

• Gas demand and Renewable weather forecasts.
• Carbon markets.
• Geopolitics and Russian gas flows.
• European storage levels.
• LNG supply.

Carbon:

• EUA’s are currently trading around 87 €/t, with UKA’s around 87 £/t.
• The EUA Carbon market continues to trade sideways with lowering seasonal demand.
• Geopolitical tension with Russian gas flows could influence short term price movements.