All Eyes On Russia And Ukraine Once Again
There is still no agreement on a ceasefire in Ukraine as yet, and the market holds to see what comes next. It is assumed further talks are taking place behind closed doors in an attempt to reach an agreement. The market will continue to watch this closely.
On Friday 14th March it was rumoured that some countries are pushing for the gas storage filling targets to be made more flexible – with the 90% to be hit between 1st October and 1st December instead of 1st November. The current belief is that a fixed date allows for price manipulation of the market and is pushing prices higher and this ‘flexibility’ around dates will help ease that situation. The proposals are currently being voted on.
Market Drivers
Gas
Falling
A draft proposal by a number of EU countries is further pushing for more flexible storage targets. This involves making the 90% deadline a variable target as well as making intermediate targets voluntary in hopes to ease market distortions.
The US's ongoing tariff wars have raised concerns about stifling economic activity and in turn potentially reducing overall energy consumption
Rising
Strong interest in Greece's Revithoussa LNG terminal with capacity now booked until 2030.
Several US LNG exporters are seeking to renegotiate higher prices with buyers, due to rising costs, which could weaken the competitive edge of US LNG and increase LNG import fees.
Electricity
Falling
UK’s Planning and Infrastructure Bill is expected to accelerate grid connections and renewables, reducing reliance on gas-fired generation.
Meteorologists have forecast that the La Nina weather pattern will transition to neutral conditions in the coming months and will persist throughout the summer over the Northern Hemisphere, improving renewable output prospects.
Rising
Trump's tariffs on EU steel and aluminium pose consequential risks to the EU's energy sector, by undercutting local production and impacting renewable buildout.
News reaffirming a linkage between the UK ETS and the more expensive EU ETS scheme continue to offer bullish signals.
Market Focus
EU suggestions of tighter regulations faces push back from industry bodies.
European futures prices have followed a volatile but overall positive pattern since the second half of last year, driven by fundamentals and geopolitical risk, but exacerbated by a significant increase in tentative interest in the market. The EU has been considering tighter regulations to address the impact of this but this has faced some push back from industry bodies. They have reiterated the role that speculators play, improving liquidity in the market and facilitate hedging for physical traders by taking positions in longer-dated futures markets (ensuring energy producers can sell their produced volumes) before selling the volume closer to the point of delivery.
Investment funds have decreased their long positions in recent weeks, partially on improved fundamentals, but also likely on concerns about this regulation. The direction the EU chooses to follow remains uncertain at the moment but is likely to have a strong influence on market dynamics and prices.
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