Forward prices slide with sanctions yet to hit Russian energy – Metro US

Forward prices slide with sanctions yet to hit Russian energy

FILE PHOTO: A gas burner is pictured on a cooker
FILE PHOTO: A gas burner is pictured on a cooker in a private home in Bordeaux

PARIS (Reuters) – European forward power prices fell further on Friday, with sanctions against Russia for its invasion of Ukraine yet to have an immediate impact on energy supplies. [NG/EU][O/R]

The price fall also came as an industry source said Russia’s Gazprom is set to resume gas supplies via the Yamal-Europe gas pipeline from Poland to Germany later on Friday amid high demand in Europe, especially from Italy.

As Russian missiles pounded the Ukrainian capital Kyiv on Friday, the European Union was preparing a third round of sanctions against Moscow that would further target Russia’s energy and financial sectors, specifying the phasing out of coal imports from the Russian-occupied Donbass region.

Some international companies are preparing for further sanctions due to exposures to Russia.

The Netherlands said that excluding Russia from the global SWIFT system of interbank payments should remain on the table, while France said some EU countries have reservations, but the government in Paris is not among them.

Meanwhile Poland, which is reliant on coal power for a majority of its electricity supply, proposed including imports of Russian coal in the bloc’s package of sanctions.

Europe will need to secure large volumes of gas if it wants to avoid soaring prices and crippling energy bills next winter in the event of disruption to flows from Russia.

Russia’s invasion of Ukraine will possibly lead to a change in course in Germany’s energy transition, analysts at Enervis said, adding that continued operation of nuclear power plants and a slower phase-out of coal are conceivable.

“Our forecasts show that, with long-term high gas and CO2 prices at the current level, we will see electricity prices remaining high,” Enervis analyst Mirko Schlossarczyk said.

“Compared to a reference in which a gas price decline to 25 euros/MWh by 2030 was assumed, the annual base on the wholesale electricity market has doubled to around 140 to 160 euros/ MWh,” he added.

But in the short term, front month and front quarter contracts fell across the board in both France and Germany in afternoon trading on Friday.

German baseload power for 2023 delivery plummeted 18.4% to 146.85 euros ($165.13) a megawatt hour (MWh) at 1642 GMT, after hitting a contract high of 184.50 euros Thursday.

The equivalent French baseload power for 2023 delivery fell 12.1% to 184.50 euros.

European CO2 allowances for December 2022 expiry, rose 0.9% to 87.84 euros a tonne, while hard coal for northern European delivery in 2023 fell 13.1% to $126 per tonne.

($1 = 0.8893 euros)

(Reporting by Forrest Crellin, additional reporting by Vera Eckert; editing by Jason Neely and Alexander Smith)