Southern Cone gas and power markets short-term outlook: January 2022

Hydrology has been improving significantly in Brazil in the last few months. In January, while hydro inflows were 43% higher than the average, reservoir levels in the Southeast reached 41%, the highest level for the month in the last five years. As a result, power spot prices were reduced and the gas balance keeps softening. Meanwhile, hydrological prospects keep deteriorating in Chile and Argentina, boosting thermal power dispatch. To face this situation, both countries have been increasing fuel imports. In Chile, the recently-signed firm GSAs with Argentine producers will support the operations of the gas-fired power plants, but the country will keep requiring the dispatch of diesel-fired plants. Similarly, Argentina will increase liquid-fuel imports, as lack of pipeline capacity and low imports from Bolivia have prevented additional gas burn.