State of the Energy Market – 19th May 2022

Daily Updates

Despite the ongoing war between Ukraine and Russia raising fears about Europe’s energy security, the gas and electricity markets have eased again on Thursday 19th May, with the UK benefiting from above-average temperatures and plentiful LNG and Norwegian imports. Furthermore, decreasing Asian LNG spot prices have reduced the JKM benchmark’s premium over NBP in recent weeks, and JKM is now trading at a discount to NBP for the months of June and July. The Asian discount is most likely the result of recent demand destruction and lockdown restrictions.

Weather projections have returned to seasonal norms from the 22nd of May, and further out looks mild. Simultaneously, Gazprom made numerous announcements on the rouble payment mechanism but has yet to identify who has complied. This is adding volatility to the gas market and for the time being, any downside for the Winter-22 contract is expected to be limited, particularly while the market
awaits the outcome of the new rouble mechanism payments to Gazprom, which are
scheduled for Friday, 20 May. 


June 22 wholesale gas prices closed at pence per therm on Wednesday 18 May, which was a decrease of -2% against the previous day’s closing price.


Wholesale power prices for June 22 closed at £176.74 per MWh, which was a decrease of -2% against the previous day’s close

In other energy related news:

Russia’s invasion of Ukraine has forced the European Union to rethink its energy strategy. On Wednesday, a 210-billion-euro plan was presented to wean Europe off Russian fossil fuels by 2027 and use the shift away from Moscow to speed up its transition to green energy. Brussels advocated for more non-Russian gas imports, accelerated renewable energy deployment, and increased energy conservation programmes. According to campaigners, the expenditures planned by Brussels risk trapping the EU in a long-term reliance on CO2-emitting gas, stoking climate change and driving up energy prices.

According to a research, several large UK fossil fuel projects have been approved since Cop26, and about 50 schemes are expected to be approved between now and 2025. It is expected that a substantial number of new North Sea oil and gas developments with a licence, but no final consents would be approved soon, by passing the UK government’s “climate compatibility” assessments announced last year. According to Uplift, a climate advocacy group, up to 46 such projects might be allowed between 2022 and 2025.

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