Southern Cone gas and power markets short-term outlook October 2021

The combination of demand slowdown and better hydrology in October alleviated regional electricity supply risks. Hydro reservoirs recovered both in Brazil and Chile, resulting in significant electricity spot price reductions (to R$253/MWh and US$49/MWh, respectively). Even though, thermal dispatch will keep high in the next months which, in combination with the recent spike in international fuel benchmarks, will result in higher spot prices through the end of the year. On the gas side, Argentina managed to start firm export agreements in October, leveraging its seasonal domestic demand reduction; the surplus is going to Chile, which will be displacing coal-fired generation. Bolivia also managed to deliver interruptible volumes to Brazil, taking advantage of the reduction of deliver-or-pay volumes assigned to Argentina. In the next few months, some of Brazil’s merchant gas-fired power plants will benefit from Bolivia’s extra gas.