Volatility in the gas market despite high gas storage levels

Last week, we saw volatility in the gas market increase once again. Gas prices surged after it was announced that work at a gas processing facility in Norway had been halted. Despite the fact that European gas storages are now well filled, there is still uncertainty regarding gas supply to European countries. The gas contract for July almost reached 50 €/MWh before the price dropped significantly. Ultimately, the contract for July closed only 3 euros higher than the previous week at 35 €/MWh. August became over 2.5 euros more expensive and ended the week at 35.4 €/MWh.

At the beginning of last week, there was a reasonable amount of wind generation in Germany and The Netherlands. However, wind generation was very limited after Tuesday. At the same time, there was almost a maximum amount of solar generation throughout the week. With the significant increase in gas prices, the question arose whether coal-fired power plants would replace gas-fired power plants, which had been the marginal units in recent weeks. However, this does not seem to have been the case as gas prices dropped significantly again. In addition, some coal-fired power plants that have not been operational for several days have a significant startup time, which can take up to one and a half days. Furthermore, it was observed that due to increased electricity demand in France, gas-fired power plants were still price-setting during the afternoon hours. As a result, the Dutch power price was much higher than the previous week, over 28 euros, as it averaged 103 €/MWh.

CO2 also became more expensive. The contract for December 2023 closed nearly 6 euros higher at 92.3 €/EUA. The Dutch power contracts for July and August became respectively 8.4 euros and 4 euros more expensive, closing at 100.7 €/MWh and 102.2 €/MWh.

For next year, gas and CO2 became significantly more expensive. The gas contract for 2024 closed over 4 euros higher at 51.1 €/MWh. CO2 increased by almost 6 euros and ended at 96.8 €/EUA. The Dutch power contract for next year increased by nearly 8 euros and settled at 131 €/MWh. The spark spread for 2024 worsened by almost 3 euros and reached -1.2 €/MWh. The CDS improved by 2 euros and was 7.6 €/MWh.

Weekly changes