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    European gas and power prices fall on EU market intervention uncertainty [GGP]

Summary

European power prices have seen a large decline over the last two weeks in line with falling gas prices caused by the EU's plan to intervene in the power market. In the UK power prices have fallen as much as 43% compared to two weeks ago.

by: Rystad Energy

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Complimentary, Natural Gas & LNG News, Europe, Global Gas Perspectives, Market News, News By Country, EU

European gas and power prices fall on EU market intervention uncertainty [GGP]

European gas and power prices continued to fall last week due to uncertainty on how the potential EU market intervention will impact the market. 

The largest fall can be found in the UK, with a large decline of 43% last week compared to two weeks earlier, with an average of €343 per MWh. 

This large fall has been caused by lower gas prices in addition to stronger wind supply in the UK and on the continent. 

Italy remained the most expensive market, but also here a significant fall was seen, with a weekly average of €469, a reduction of 28% compared to two weeks before. 

France and Germany both also saw large declines last week, averaging €432 per MWh and €402 per MWh, respectively.  

French nuclear availability is estimated at 48% on Monday 12. September, a slight improvement on last week. 

Going into week 37, wind power is expected to significantly increase in northwest Europe.  

Strong wind and continued decline in gas prices could therefore result in falling prices for the third week in a row. 

The TTF continued to fall for the majority of last week, despite no return of Russian volumes through Nord Steam 1 (NS1). 

NS1 is not expected to return anytime soon either, which should provide a strong bullish signal. 

However, this has been outweighed by the uncertainty among market participants on the potential impacts of possible EU market interventions, in addition to very healthy storage levels across Europe. 

The TTF spot price ended the week at €191.7 per MWh, a 42% decline since the peak was reached on the 26. September.

Prices have also opened down on Monday 12. September.

The TTF front-month has been on a similar trajectory as the spot market, falling 35% in the same period as well, ending last week at €202 per MWh. 

This has naturally led to a decline in power forwards as well, as shown in figure 2 below.  

The French power front-month ended last week at €513, the lowest price in over a month. 

German front-year is still trading at a discount on fear of French nuclear outages for the winter, ending last week at €400, also the lowest level since early August. 

It is unclear if this bullish sentiment in the gas and power market will continue, as a lot of the uncertainty lingers on the EU discussions on market intervention. 

European Union energy ministers met on Friday to discuss measures to curb electricity prices in the EU. 

An outcome of the meeting was that Brussels was tasked with drafting a proposal to cap revenues of non-gas energy producers and use the revenue to reimburse consumers. 

The ministers backed away from a Russian gas price cap but held the door open for a general price cap on gas, regardless of the source. 

The final proposal is set to be unveiled tomorrow, Tuesday, and energy ministers are planned to meet later this month to negotiate and approve the final plans  

Prices in the EU ETS carbon market have also been strongly declining over the last few weeks, on potential ETS interventions and overall bearish sentiment for demand going forward. 

The 2022 December contract closed last week at €66.1 per tonne of CO2-equivalents, the lowest level since early March when the invasion of Ukraine still was sending shockwaves through the energy market. 

The contract has seen a total 33% decline since the peak on the 19th of August, and this week prices opened down. 

The continued discussions on market intervention are expected to be the dominant factor this week, and going forward for gas, power, and carbon in Europe. 

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