WEEKLY ENERGY MARKET REVIEW

Transcription

1 WEEKLY ENERGY MARKET REVIEW WEEK 17, 2018

2 Last Week at a glance! BRENT M+1 GAS TTF Y+1 POWER GE Y $/bbl /MWh /MWh The price rose, driven by the expectations that supplies will tighten as OPEC and its allies are mulling an eventual extension of their current agreement for the first half of The price rose, following the bullish movement of the oil contracts and stimulated by the low levels at the European gas storage facilities. The price declined, influenced by the bearish correction of the carbon price. Outlook (Horizon 1 Week) : Outlook (Horizon 1 Week): Outlook (Horizon 1 Week): A rise towards the support level of $/bbl. A decline towards the support level of EUR/MWh. A decline towards the support level of /MWh. 2

3 HIGHLIGHTS Evolution of main energy products in the last week % : Average of prices of working days of Week -1 vs. Week -2 UK Power BL Y+1 2.5% Poland Power BL Y+1 1.9% Spain Power BL Y+1 1.7% Italy Power BL Y+1 2.6% Netherlands Power BL Y+1 3.2% Germany Power BL Y+1 3.0% France Power BL Y+1 2.4% Netherlands Gas TTF Y+1 2.6% France Gas PEG Nord Y+1 3.1% Germany Gas NCG Y+1 2.5% UK Gas NBP Y+1 3.4% Poland Gas Y+1 3.0% Italy Gas PSV Y+1 3.2% Coal API-2 Y+1 3.9% CO2 Dec % Gasoil M+1 2.4% Brent M+1 4.5% 0% 5% 10% 15% 20% 25% 30% 3

4 OVERVIEW The European currency fell against the U.S dollar, driven by a lower than expected value of the European Consumer Price Index for March This week, the main economic events in the European Union are the announcements of the ECB Interest and Deposit Rate Decisions along with the ECB Monetary policy statement and press conference Exchange Rates: /$ US EUROSTOXX

5 OVERVIEW The purchasing managers index is a composite indicator of a country's manufacturing activity. It takes into account order intake, production, employment, shipments and stocks in the manufacturing sector. PMI < 50: contraction in the activity PMI > 50: expansion in the activity PMI: US China Germany PMI - Germany PMI - China PMI - US 5

6 OIL The oil price rose on Monday for the fifth day in a row, on expectations that supplies will tighten as OPEC and its allies are mulling an eventual extension of their current agreement for the first half of The price were stimulated also by the rumors that the United States may impose sanctions against Iran. The joint OPEC/Non-OPEC Ministerial Monitoring Committee met on Friday in Jeddah, Saudi Arabia. At this meeting, Saudi oil minister said that the global economy could tolerate higher oil prices and that there wouldn t be demand destruction. The comments suggest OPEC is set on keeping the limits in place for the rest of this year. Russian energy minister said that the coalition may decide to gradually reduce its production cut quotas in the second half of 2018 or in 2019 at the next full ministerial meeting in June. U.S. President Donald Trump accused OPEC on Friday of artificially boosting oil prices, saying that the oil markets are well supplied. In response to his declaration, OPEC Secretary General Mohammed Barkindo said the output cut agreement halted the collapse in global oil prices, and is on course to restore stability on a sustainable basis in the interest of producers, consumers and the global economy. Brent Oil M+1 - $/bbl Gasoil M+1 - /ton

7 OIL According to a Bloomberg analysis, WTI is beginning to lose its positions as the premier oil benchmark price in the U.S., as oil traders are gaining interest in alternative pricing metrics, such as prices based in Houston or Midland. Given the the growth of refining and petrochemical capacity along the Gulf Coast, oil prices based in Houston are starting to become more relevant to traders and purchasers. If this situation will continue WTI might eventually give way to a Houston benchmark as the top marker for North American crude OPEC Crude Oil Production Mbbl/day Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 US: Crude Oil Stocks Mbbl (source: EIA)

8 COAL The European coal prices continued their rise driven by a supportive energy complex and a strong bullish sentiment. However, from a fundamental point of view there is an important downside risk as the physical demand is weak and the Asia-Pacific market looks rather bearish. Global seaborne coal import volumes will likely rise by just 1.5% in 2018, to 1.2 bn tonnes well below 2017 growth levels led by weakening Chinese demand, shipbrokers Hartland Shipping Services said. China s coal imports rose 8 % in 2017 to 200 Mt but are expected to rise by just 1.1 to 220 Mt this year as the country is fighting pollution. COAL API2 (In USD/ton) Y+1 Y+2 Y+3 8

9 CO2 The European carbon price declined to near 3-week low, extending last week s losses amid a weak demand and a milder weather outlook. It seems the speculative participants are closing their transactions, pushing the market to a more usual level. Germany s new environment minister supports the idea of the introduction of a wider CO2 price, she said in an interview. This declaration came after a senior French official said that France hopes Germany s new government will overcome its traditional opposition a a carbon price floor. However, German energy policy is handled by the economy ministry, now in the hands of Peter Altmaier (CDU/CSU alliance). The CDU/CSU is still reluctant to introduce and national carbon price for non-ets sectors. EU CARBON (In EUR/ton) EUA Dec 18 CER Dec 18 9

10 NATURAL GAS Natural Gas Storage Total EU 28 : Date: % 24% 14% 0% 20% 25% 7% 19% 40% 51% 59% 10

11 NATURAL GAS LNG Storage Total EU 28 : Date: % 23% 31% 45% 31% 50% 16% 29% 11

12 NATURAL GAS Oil linked natural gas premium at 6.68 EUR/MWh Oil linked natural gas price (EUR/MWh) 26 Oil linked gas price Cal Y+1 Evolution Trend Apr % Apr TTF gas Cal Y+1 Oil linked gas price Cal Y+1 Premium [Oil linked gas] - [ZEE TTF average] 12

13 25/04/ /05/ /05/ /06/ /06/ /07/ /07/ /08/ /08/ /08/ /09/ /09/ /10/ /10/ /11/ /11/ /12/ /12/ /01/ /01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/2018 NATURAL GAS The price rose due to a supportive energy complex and still low storage levels. The current trend is also stimulated by an outage at Norway s largest natural gas processing plant, Kollsnes, which is cutting flows by 18.5 mcm/day TTF SPOT EUR/MWh Market Average Period Price /MWh Month M-12 March Month M-1 March Month M April Current Year Year Y

14 NATURAL GAS The TTF futures continued their rise, influenced by the advance of the oil prices, the bullish pace of the coal contracts and the expectations of a strong demand in order to restore the storage levels TTF Forward Prices EUR/MWh Spread /MWh 12-Month moving average Last Week average 18 TTF Y+2 vs Y TTF Y+3 vs Y TTF Y+1 TTF Y+2 TTF Y+3 14

15 4/24/2017 5/8/2017 5/22/2017 6/5/2017 6/19/2017 7/3/2017 7/17/2017 7/31/2017 8/14/2017 8/28/2017 9/11/2017 9/25/ /9/ /23/ /6/ /20/ /4/ /18/2017 1/1/2018 1/15/2018 1/29/2018 2/12/2018 2/26/2018 3/12/2018 3/26/2018 4/9/2018 4/23/2018 NATURAL GAS An additional 4.9 Bcm of gas will be needed for storage injections in the EU this summer to reach the same stock level as in 2017, the EU gas transmission system operators' body ENTSOG said in its Summer 2018 outlook report. Ahead of the winter , a total of 1,021 TWh (96.5 Bcm) of working gas volume was stockpiled, representing around 85% of capacity, but from a higher starting point of 26%. Traded volume on Italy's virtual gas hub PSV, hit the second highest monthly level in March at 9.34 Bcm amid a surge in domestic demand, data published by operator Snam showed. The traded volume in March jumped 13% from February and 20% form a year ago. However, the churn rate in the month -- volume traded divided by physical volume -- was 3.2, meaning that physical volume traded on the hub was just over 3 Bcm. For the 6 months of winter from October 2017 to March 2018, traded volume on the PSV increased 10% year on year to 53.9 Bcm, Snam said. Main European Hubs Gas Prices EUR/MWh NBP Gas Futures GBP/therm TTF Y+1 NCG Gas Y+1 IT PSV Gas Cal Y+1 PEG Nord Y+1 Spread vs TTF 12-Month moving average Last Week average PSV (IT) PEG NORD (FR) NCG (GE) NBP S+1 NBP S+2 15

16 NATURAL GAS Asian spot LNG prices slightly rose influenced by a fairly good level of demand, robust oil prices and strong hub prices in northwest Europe. However, the rise was tempered by the resumption of exports from Papua New Guineea and the start of the commercial operations at Cove Point LNG project in the United States. China is unlikely to see a repeat surge LNG imports this coming winter as the country has learned from the previous cold season to keep demand under control, the head of Unipec, the trading arm of Sinopec, said. Sinopec said in early April that it will increase its natural gas supplies significantly in the next six years and also plans to more than double its LNG receiving capacity in the next 6 years to 26 million tonnes on an annual basis. Henry Hub (USA), TTF (EU), JKM (Japan) SPOT USD/MMbtu Global LNG imports in 2017 increased by nearly 10%, the highest annual growth rate since 2010, reaching Mmt, while expectations of an LNG surplus failed to materialize as rising imports into China contributed to balancing the market, the International Group of LNG Importers' 2018 report showed. Spot LNG import reached approximately 20% of total volumes delivered in 2017, representing about 59 Mmt of LNG. Most of the demand growth occurred in Asia, where LNG imports grew by 19.6 Mmt. The largest growth in spot imports came from China and South Korea which imported 21 % and 22 % of their LNG on a spot basis LNG Asian Weekly Spot Natural Gas Henry Hub Natural Gas TTF 16

17 ELECTRICITY The German spot price declined driven by forecasts of a higher renewable output and a mild weather. Plans for a new Dutch-German interconnector are set to be brought forward to this summer, with the confirmation that the cable should be in operation by the end of The cable will add an extra 1 GW of cross-border capacity between the 2 countries. Dutch winter demand is around GW, so a full 1 GW of additional capacity will potentially limit the price spikes on the Dutch power market. German Power Day Ahead Baseload EUR/MWh MARKET AVERAGE PERIOD PRICE /MWh Month M-12 March Month M-1 March Month M April Current Year Year Y

18 ELECTRICITY The German futures declined, influenced by the bearish correction of the carbon price. Installed capacity of German conventional power plants is expected to drop to 75.3 GW by 2023 from just 90 GW now, according to estimates by German energy lobby group BDEW. Country s peak demand will be around 81.8 GW in the early 2020s, around 8 % below the secured demand of 75.3 GW, according to grid regulator BNA. By 2023, around 4.4 GW of new conventional capacity will be added in Germany, while 18.6 GW will be closed, included its latest nuclear plant. This gap may jeopardize the country s climate goals for 2030 in case of absence of low-carbon capacity to replace the closure of conventional plants. German Power Futures EUR/MWh MONTH LAST WEEK SPREAD /MWh MOVING AVERAGE AVERAGE GE BL Y+2 vs Y GE BL Y+3 vs Y GE Power BL Y+1 GE Power BL Y+2 GE Power BL Y+3 18

19 ELECTRICITY Central Western Europe Electricity Futures Total announced it had agreed to buy % of Direct Energie s shares for 1.4 bn. Direct Energie is the third largest electricity supplier in France after EDF and Engie. Its installed capacity amounts 1.35 GW of which 800 MW is a gas-fired power plant and 550 MW of renewable capacity. The company planned to add 600 MW of wind and solar capacity by 2020 and aimed to obtain 1.2 GW of hydropower assets after the opening of hydropower concessions in France. Central Western Europe Futures EUR/MWh SPREAD VS GE POWER 12-MONTH MOVING AVERAGE LAST WEEK AVERAGE BE FR NL Spain and France have awarded MW of cross-border for May delivery - the highest record for the month, data from the Joint Allocation Office showed. Almost 1.1 GW was awarded at an average price of EUR/MWh from France to Spain while 820 MW were awarded in opposite direction at a price of 0.29 EUR/MWh German Power BL Y+1 Belgium Power BL Y+1 France Power BL Y+1 NL Power BL Y+1 19

20 4/25/2017 5/9/2017 5/23/2017 6/6/2017 6/20/2017 7/4/2017 7/18/2017 8/1/2017 8/15/2017 8/29/2017 9/12/2017 9/26/ /10/ /24/ /7/ /21/ /5/ /19/2017 1/2/2018 1/16/2018 1/30/2018 2/13/2018 2/27/2018 3/13/2018 3/27/2018 4/10/2018 4/24/2018 ELECTRICITY Belgian Power Market Engie has postponed the restart of its Belgian nuclear reactor Doel 1 (433 MW) by 5 days. The French utility stopped the plant on Monday morning and previously said it would restart it at midnight on Tuesday 24 April. The delay is due to maintenance works on a cooling circuit. The Belgium government will double the North Sea waters areas made available for offshore wind park projects after 2020, as part of its strategy to exit from nuclear power. So far, the country has 4 offshore wind parks with an installed capacity of 871 MW (over 225 km²). Belgium plans to bring online the additional 1.8 GW of capacity by 2025 as this is the date by which the remaining 5.9 GW of country s nuclear capacity is due to close. However, the need to build additional power lines to accommodate the new capacity may delay the launch. Belgian Power Futures EUR/MWh BE Y+1 BE Y+2 BE Y+3 20

21 ELECTRICITY Central Eastern Europe Electricity Futures The European Federation of Energy Traders (EFET) is considering reopening the negotiations with Hungary over a power trading fee which is seen as a barrier to new entrants. The fee was introduced in 2007, imposing the energy companies trading on the country s wholesale power market to pay 0.06 %of the values of their sales, excluding VTA. According to traders, the extra costs for firms can range from to annually. Hungary is Europe s fifth most liquid OTC power market. Central Eastern Europe Futures EUR/MWh SPREAD VS GE POWER 12-MONTH MOVING AVERAGE LAST WEEK AVERAGE PL RO CZ HU German Power BL Y+1 Polish Power BL Y+1 Romanian Power BL Y+1 Hungary Power BL Y+1 Czech Power BL Y+1 21

22 ELECTRICITY Electricity UK - Nordpool UK POWER SEASON +1, +2 GBP/MWh UK S+1 UK S+2 NORDPOOL Y+1 EUR/MWh

23 ELECTRICITY Electricity Spain - Italy Spain must extend the lifespan of its nuclear power plants from 40 to 50 or even 60 years, Endesa CEO said at the shareholder general assembly of the Spanish utility. He pointed that this extension is indispensable for the nation commitment to the Paris climate agreement. The next licence renewal at a Spanish reactor is scheduled for June 2020 but political parties views on this problem differ. The government was unable yet to pass any significantly reform. According to ICIS, Italy is preparing to hold its first round of electricity capacity market auctions shortly after the end of summer this year. The final regulation is expected to confirm a 250 /MWh price threshold at which remunerated capacity needs to produce power on the dayahead, ancillary services and intra-day markets. The rules should also confirm a /MW/year premium cap to payments awarded to existing capacity and a cap of MW/year for the new projects. SPAIN Y+1 EUR/MWh ITALY POWER BASELOAD Y+1, +2 EUR/MWh Y+1 Y+2 23

24 24/04/17 8/05/17 22/05/17 5/06/17 19/06/17 3/07/17 17/07/17 31/07/17 14/08/17 28/08/17 11/09/17 25/09/17 9/10/17 23/10/17 6/11/17 20/11/17 4/12/17 18/12/17 1/01/18 15/01/18 29/01/18 12/02/18 26/02/18 12/03/18 26/03/18 9/04/18 23/04/18 24/04/17 8/05/17 22/05/17 5/06/17 19/06/17 3/07/17 17/07/17 31/07/17 14/08/17 28/08/17 11/09/17 25/09/17 9/10/17 23/10/17 6/11/17 20/11/17 4/12/17 18/12/17 1/01/18 15/01/18 29/01/18 12/02/18 26/02/18 12/03/18 26/03/18 9/04/18 23/04/18 ELECTRICITY Short Range Marginal Cost SRMC stands for Short Range Marginal Cost and represents the marginal cost to generate electricity from either coal or natural gas. On the first graph, we compare the SRMC coal with German Baseload Power, and on the second the SRMC gas with German Peakload SRMC COAL vs GERMAN BASELOAD EUR/MWh SRMC API-2 Y+1 German Power BL Y+1 SRMC GAS vs GERMAN PEAKLOAD EUR/MWh SPREAD SRMC Coal API-2 vs German Power Baselaod Y+1 Gas NCG Y+1 vs German Power Peaklaod Y+1 TECHNICAL ASSUMPTIONS 12-MONTH MOVING AVERAGE LAST WEEK AVERAGE GAS COAL Efficiency Factor 50 % 36 % Management Cost SRMC NCG Y+1 German Power Peaklaod Y+1 24

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