Headlines:
- Gas and Electricity Wholesale prices are lower than last week
- Trade tariffs are reducing economic and energy demand forecasts
- EU Gas Storage, which is very low, has started to be refilled
Energy Overview
Gas and Electricity Year Ahead Wholesale costs are lower than in last week’s report and significantly lower than most of 2021 / 2022 / 2023, but still higher than 2020. The Oil price is $64 from $74.
Last week’s announcement of the introduction of tariffs to imports into the US, at 10% for many but much higher for the likes of China and the EU, will likely slow the global economy and reduce previous growth forecasts for Oil, Gas and Electricity. In response, all of these have seen large losses. As the Oil price was falling, OPEC+ surprised the markets by increasing Oil output as planned, but by more than expected, which is a further downward pressure. If Oil falls too low, then producers with high production costs, which includes the US, may have to reduce output.
EU Gas Storage has started to be refilled and is now 35% full, from 34% last week and 60% last year. There are a series of interim targets, but they are required to be 90% full by November 2025. This could be challenging due to their low starting point and less Gas being available with the end of the Ukraine / Russia transit deal in January 2025. EU members are still hoping for some relaxation of targets to allow more flexibility in their purchases, and for additional Russian Gas to be available to help with winter 2025/26 heating demand. The peace talks between Russia and Ukraine appear to be making little progress. The initial positive sentiment reduced prices, and any further developments have the potential to push them in either direction.
It is not clear how a number of factors will influence prices, which include peace talks, storage levels and tariffs. We would encourage those with Gas and Electricity contracts that are due to end in the next few months and potentially further out, to engage with Indigo Swan and monitor positions closely.
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