Energy Market Report - May 2017



Dutch Power

Believe it or not, May 2017 was relatively dry, with some countries registering less than 80% of the normal precipitation. Where water is used to generate electricity, this had a slight upward effect on pricing. Furthermore, an increase in other fuels such as coal and oil and with it gas have increased the pressure on electricity prices, which have risen a bit towards the end of May and moving into the start of June, but for the most part, despite these developments, prices have remained relatively stable.

This picture could change in the course of the coming weeks. As we move into the summer months electricity demand could rise as temperatures increase, only in part off-set by the closure of many production facilities for the summer break in July and August. Currently there is also limited availability of French nuclear power generation, with an estimated 55% of capacity due to maintenance and inspections. Finally, we have seen an increase in CO2 prices to levels last record in April.

As a result we would expect stable to rising electricity prices over the next several weeks. Should the current issues surrounding Qatar give rise to further international disagreement, this may effect fuel prices and Qatar is the largest supplier of LNG. Barring unexpected geopolitical developments however, any price increases over the next few weeks are likely to be moderate at best.

TTF Gas

The gas market has continued to remain surprisingly stable during the course of the last several weeks, and despite some volatility as we have seen in the oil markets, the overall price level has continued to drop as we move into the summer season. In general we can expect demand to continue to go down, as long as there are no serious political events which threatened to disrupt gas or oil deliveries. On the other hand, it is not entirely out of the question that the current disputes between Qatar and several other Arab countries will undermine OPECs efforts to keep production levels down and thus support oil prices. Disagreement amongst the oil producing countries would likely let the agreement fall apart, with considerable effects and oil prices, and following this gas prices.

Storage issues could further complicate matters as lack of activity could potentially lead to an oversupply, at least during the summer months. It would appear that a careful observation of price movements over the next several weeks could lead to buying opportunities. Gas prices at any rate remain attractive currently, and we see downward potential, at least for the summer period. Clients should not however expect this to last, as continued storage issues could reverse the price developments as the heating season approached after the summer holidays. Expect some volatility as well as supply availability shifts during the maintenance season, especially on the interconnector.

Belgium Power

As is clear from the graph above, Belgium power prices have recovered quite significantly from the drop in early 2016, and in the last few weeks have climbed again.

Persisting concerns about the safety of the Belgium nuclear plants are being voiced by the neighboring countries Germany and the Netherlands, and even within the country it would seem that resistance is increasing. On June 25 a 90 km long chain of people is planned in eastern Belgium as part of a protest against the operation of nuclear plants, which many perceive as unsafe.

Unfortunately for price developments, Belgium needs this generation, and issues here as well as the down time of capacities in France do not make price expectation looks bright for users, as the likelihood of further increases seems to overweigh and downward pressure which could come from developments in the fuel markets, especially gas, will likely only slow down, but not stop the increase in electricity prices.

Any unplanned outage and an extension of existing outages of nuclear capacity juts announced by EdF is likely to support prices in the Belgium market for the next several weeks, so buyers are well advised to sit back and relax.

Download Full Report