So far this week, energy news has been dominated by nationwide blackouts seen in Spain and Portugal on Monday. Investigators will need some time to perform a root-cause analysis and determine the sequence of failures that contributed to the blackout. However, it has raised questions about the reliability of the power grid especially as Spain and Portugal have one of the highest penetrations of renewable generation from wind and solar.
Focusing back on the wholesale gas markets, on Friday the market broke below the support level of 80p/th and €33/MWh on the front month NBP and TTF. Following this move, Monday’s session was relatively quiet, however the bearish momentum continued on Tuesday. The warm weather, soft demand and stable supply from LNG and Norway has weighed on the market. From a geopolitical front, market players continue to monitor Russia-Ukraine peace talks as well as President Trump’s tariffs.
Elsewhere a new concern regarding additional gas demand has been developing. Reports of lower hydropower stocks and wind speeds in northwest Europe are raising concerns of additional gas and coal-fired power generation at a time when Europe already needs additional gas volumes to refill storage depleted after the winter. European storage levels are currently around 39% full.
Market concerns have eased from earlier in the year regarding injections with the European Commission proposing to lower storage target levels. Prices could be at risk should a rise in gas for power demand affect storage refilling. Hydro reserves are lower than last year amid a drought in Germany, France, and low snowpack in the Alps. Rystad Energy are also forecasting lower wind speeds this year cutting their wind generation compared to last year.
Overall, while short-term fundamentals appear comfortable, medium-term volatility could return quickly. Next week the European Parliament vote on gas storage targets scheduled between 5th and 8th May.
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