|Strom Baseload (EUR/MWh),|
|Gas Baseload (EUR/MWh),|
Warning: No liability for accuracy of data.
Market Comment - December 2019
In mid-February 2016, oil prices reached a low of just under USD 30/bbl, exceeded USD 83/bbl (Y+1) in the summer of 2018 and have now reached USD 62/bbl (Brent Month Ahead). In the long term, the prerelevant gearing of oil prices to full costs is becoming ap-parent and the premium for political uncertainty from December 2018 has briefly disap-peared. The market also believes that the supply situation will improve even further in 2020. This will be strengthened by the currently increasing concerns about the develop-ment of consumption, as economic growth is globally seen as weaker. Most market partic-ipants now do not expect a shortage of oil, although OPEC took measures to reduce sup-ply in June 2019 and continues to react.
The oil price affects the gas (forward) market prices on the CEGH (Austria, Hungary, Slo-venia, Croatia) and NCG (Germany, Czech Republic, Slovakia, Western Austria) and TTF (Benelux) via the gas-oil price correlation on the forward market. At the beginning of No-vember 2019, gas storage volumes in Europe were at historically unseen heights. Short-ages are thus out of sight and spot prices below 14 EUR/MWh are a sign of this gas over-supply. Denmark's approval of the construction of Nord Stream 2 at the beginning of No-vember has greatly reduced the risk of a supply bottleneck in 2020.
Electricity production from gas-fired power plants therefore generally leads to higher elec-tricity prices. However, the CO2 price will remain a decisive factor for power prices and gas demand. And there is now - despite MSR (Market Stability Reserve) - a decrease pos-sible. Should consumption weaken (weather, economy), the owners of emission rights will be more inclined to sell them. "Buy and hold" as a management strategy will then no longer pay off.
Until October 2018, LNG prices were so competitive for sellers on the Asian market that LNG had no significance for Europe. This has changed considerably since then and LNG was imported into Europe at record levels until the beginning of July. For November 2019, gas in Asia (LNG) is trading at approximately 17,6 EUR/MWh and thus the end of the very high LNG feed-in into the European grid has come. The full storage facilities in Europe will increase the price gap to the Asian market again. The effect of threats by the USA against Russia against the Nord Stream 2 pipeline or because of the Ukrainian transit contracts is becoming increasingly unlikely. Even if renewable power plants continue to be expanded, in the medium term they can-not represent a complete replacement for coal-fired or nuclear power plants, which will be decommissioned continuously over the next few years and today provide the secured capacity at relatively low costs. At the same time, the power and gas consumption is ex-pected to rise further in the future, as power will increasingly replace oil and gas and pro-vide additional heat and mobility in households. Gas from its own production is declining in Europe, so import demand will continue to rise by itself at 5-10% per year.
After a severe drop of CO2 prices to below 5 EUR/t in spring 2017, the demand for emis-sion rights has also risen with the legal certainty for the 4th allocation period. Prices cur-rently range between EUR 23 EUR/t and 28 EUR/t. How this continues will be deter-mined by politicians, from Brexit up to the German Coal Commission. However, we expect prices to fall slightly; prices below 20 EUR/t are also possible. The question here is whether it will rather happen in 2020 or 2026. However, a strong EU Commission with a focus on climate protection can also reverse this expectation.
Prices for all energy raw materials (electricity, oil, coal and gas) fell sharply comparison with the previous year. Further down, the movement of gas and electricity is only possible to a limited extent. At the same time, the high volatility of the spot market prices for elec-tricity and gas is only slowly diminishing. The exit from the coal market and the implemen-tation of the EU emission directives and the "Clean Energy Package" will be decisive for the further price development of electricity and gas. Fridays for Future" will also have a long-term impact. The spot markets for gas and electricity are trading at historically low prices. Economic policy is also not sending out any bullish signals. CO2 could, however, cause price extremes in electricity prices in Europe that are only marginally related to pure fuel costs. The development of costs for CO2 emissions is the most difficult parameter to estimate for energy price formation. At the same time, it is the most relevant for electricity and gas.
For your Inercomp Team