State of the Energy Market – 10th May 2022

Daily Updates

Wholesale prices are continuing to soften as warm weather and plentiful supplies overwhelm political risk related to Russian supply and commodity sanctions. Demand is projected to fall this week, with warmer and windier weather on the way and robust LNG forecast for the rest of the month, putting pressure on the DA and prompt markets. Although, with the warmer weather, we may see an increase in industrial cooling demand. Russian flows are still higher than they were earlier this year, with European gas desks deciding to terminate long-term contracts with Gazprom because the TTF remains relatively strong in comparison to the NBP, and export restrictions from the UK to the continent have widened the spread.

Further out, there appears to be a lot of risk to the upside, such as low French nuclear availability and prospective penalties on Russian coal and gas. The Win-22 baseload contract, however, could continue to weaken due to the downturn in the UK gas market and storages filling.  Although, markets may respond, as they have in the past, with a sharp price increase in response to Russia’s missile attacks on Odesa, as their ambitions to annex southern and eastern Ukraine continue.


June 22 wholesale gas prices closed at £128.71 pence per therm on Monday, which was a decrease of 6% against Friday’s (6th May) closing price.  


Wholesale electricity prices for June 22 closed at £155.45 per MWh, which was a decrease of 2% against Friday’s (6th May) closing price.  

In other energy related news:

  • Germany and Qatar are having trouble reaching an agreement on long-term LNG supplies due to disagreements over crucial terms. The tense negotiations illustrate the difficulties the EU confronts in diversifying away from Russian gas without jeopardising its decarbonisation goals; this is made more difficult by competing with other countries for LNG from Qatar. Germany, which wants to cut carbon emissions by 88% by 2040, is hesitant to agree to Qatar’s demands for long-term contracts in order to secure the enormous LNG volumes it needs to lessen its reliance on Russian gas. Qatar is also adamant about oil-indexation, tying contracts to the price of crude, whilst the Germans want to tie contracts to the Dutch TTF benchmark. To obtain this supply, the German team is anticipated to accept a classic oil-linked pricing structure, which will expose the European customer to significant financial risk when compared to European hub prices.
  • As part of its effort to wean countries off Russian fossil resources, the European Commission intends to launch a large-scale spread of solar energy and revive Europe’s solar manufacturing economy.
  • This year, Norway plans to sell a record amount of gas, increasing 8% from last year and surpassing the previous high of 2017. Pipelines to the rest of Europe would be the primary source of supply, but LNG would also be available with the reopening of Equinor’s Hammerfest facility on May 17, which had been shut down due to a fire since September 2020.

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