Europe energy prices long-term outlook H1 2019 Report

Commodity Market Report 25 July 2019

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Report summary

LNG oversupply has finally materialised. With 38 Mt of new LNG supply this year, this is too much for the Global market to absorb. Excess LNG supply has flooded Northwest European markets. European prices have crashed as a result, dragging Asian LNG prices down with them. With European hub prices now trading below US$3.5/mmbtu, the market is finely balanced. ARA coal price is lower than our 2H2018 forecast. Near-term prices are pressured by the low gas prices in Europe, China's policy uncertainty amid its trade tension with the US, and global seaborne supply improvement. Gas and carbon price trends lead power lower in the short term . We expect r power prices in 2019 and 2020 to average around 40 €/MWh in Germany and France – although spark spreads will continue to offer support to gas. Carbon prices have continued to rise in 2019, but stand to be impacted by sustained low gas prices. Prices have reached close to 30 €/tCO2 in July – up from a 5-year average of just €6/tCO2.

Oil Prices
- Non-OPEC supply continues to increase in the short term
Gas Prices
- LNG oversupply finally materialises
Coal Prices
- Developing world expansion and carbon emissions limits – two contradictory stressors
- The outlook for coal prices
Power Prices
- Climate-energy policy drives change in wholesale power markets
- Higher input costs support rising power prices in the early 2020s
ETS Carbon Prices
- Recent market trends
- Rising emissions costs reshape the power dispatch curve
- Energy policy development and strengthening of the ETS
- 2030 targets confirmed
- The long-term role of EU emissions trading
- Emissions (EUA) prices
- Carbon (EUA) price forecast