Southern Cone gas and power markets short-term outlook: balance starts softening

The significant improvement in hydrology reduced electricity supply risks in Brazil for the next six months. However, the current situation is far from comfortable as the average national reservoir levels remained at 26%. The better supply conditions have driven a new reduction in power prices to R$88/MWh, the lowest level in 2021. On the other side, hydrological prospects deteriorated in Chile and power prices reached nearly US$70/MWh, also reflecting the current spike in international fuel benchmarks, especially coal. Such conditions favour thermal players with access to Argentinian gas, which can leverage the cheaper gas to displace generation from coal and LNG. In Bolivia, the production start-up of Incahuasi 5 well has supported the country to overcome the Margarita-X3 operational issue. Now, YPFB can develop new trading opportunities with its neighbor countries in the short term.