No change to outlook this week…

If Russia invades all bets are off and prices will climb, however as we come out of Winter and the threat of a prolonged cold snap recedes, we could see the familiar summer drop in prices as demand eases, but a lot will depend on if LNG cargoes continue to come to Europe to help replenish storage levels.

In the best-case scenario where tensions ease with Russia and Russian gas flows into Europe at pre-crisis levels then the potential remains for more substantial falls in prices across the curve.

Near term gas and power, prices continue to trade within January’s range, while the big change this week is an across-the-board increase to new highs of further out contracts right to the end of the curve. The increasing cost of Carbon and continued low European storage levels will have had a knock-on effect on curve prices, but also buying pressure from longer-term hedges will have contributed with some market participants taking the view that higher prices may be here to stay for longer and far term prices looking relatively attractive.

There is no doubt however that the situation with Russia is continuing to add significant risk premiums to prices. In the absence of an invasion, January day ahead prices out-turned lower than where the contracts had been trading in the weeks prior to delivery, helped by January being a record month for LNG deliveries and the schedule for the first two weeks of February looking healthy.

Temperatures have consistently come in cooler than forecast recently but remain mild on average for the time of year and a strong pick up in wind speeds have helped balance demand.