Latest Energy Market Overview
Dukefield Energy have been monitoring the gas and electricity markets closely over the last few weeks. We can now give you a more detailed overview of what is going on and the outlook for the immediate future.
UK energy markets rebounded slightly yesterday, following an announcement by Russian officials that progress in peace talks with Ukraine is minimal. Rising premiums for Liquefied Natural Gas (LNG) cargoes are rising in Asia, potentially seeing fewer cargoes directed West in Apr-22. Forecasts of a sharp drop in wind generation over the weekend is adding upward pressure to immediate UK energy contracts.
Europe is likely to struggle to completely cut off Russian gas supplies and this could potentially lead to costly gas prices. At the moment, Europe relies on Russia for around 50% of its total imported gas but are aiming to move away from Russian gas following the invasion of Ukraine. Replacing such large volumes is likely to come with significant challenges, though that hasn't stopped the EU from targeting a 65% reduction by the end of the year. To account for this drop in Russian gas flows, additional flows through pipelines connected to the EU grid e.g. Algeria, and Liquefied Natural Gas (LNG) imports will be needed. However, LNG is already in high demand, and rising as nations globally transition away from polluting coal. This is likely to add some significant upward pressure to European energy markets, with heightened competition for LNG and non-Russian gas flows.
US President Joe Biden approved more LNG sales to Europe. In an announcement this week, the Biden administration authorised additional exports of Liquefied Natural Gas (LNG) to Europe. The hope is that the move will help to ease the European energy crunch, made worse by the conflict in Ukraine. This could provide some rising pressure to UK energy markets on greater supply prospects; however, the impact could be limited. Due to the high volumes of LNG which the UK and the continent have been receiving recently, there are some signs that the region may struggle to absorb any new volumes as processing facilities and storage are close to full. However, the impact is likely to still be overall positive, with increased cargoes from the US reducing the need to compete with Asian buyers for e.g. Qatari cargoes.
Norway's Equinor plans to supply more gas this summer. Norwegian state-owned energy company Equinor announced this week plans to increase their gas supply to Europe this summer. They expect to be able to raise capacity by postponing some maintenance and making adjustments with pipeline operators. The announcement comes as the European Union have changed gas storage laws, requiring member states to fill gas storage to 90% by winter. An increase in Norwegian output would act to limit some of the bullish impact of increased summer injection demand. Furthermore, Equinor have also received permits to increase production at the Oseberg, Troll and Heidrun fields, which could add further downward pressure on greater supply prospects for Europe. The move could see Norway replace Russia as Europe's top gas supplier in coming years.
Dukefield Energy understands that this is a very hard time for customers looking at their energy contracts. We are here to support and help. We have a number of suppliers offering a variety of products to help manage the risk of high prices and a volatile market. If anyone has any concerns or just wants some advice, please don’t hesitate to contact us.