Southern Cone gas and power markets short-term outlook: supply disruptions loom

The dry hydrology is intensifying in the Southern Cone. Due to its hydro-dependency, Brazil’s situation is the most challenging. At the end of July, energy in reservoirs in Brazil was at 36%, decreasing 4% since the end of June (SECO is at 26%). Chile’s hydro output also reduced 32% in July. As a result, average spot prices spiked to US$120/MWh. On top of the dry hydro, Argentina faced cold spells in July that raised local distribution gas demand to 90 Mcmd in a few days, cutting interruptible gas to industries and CNG. In this perfect storm, Bolivia is struggling to commit higher gas exports, so Southern Cone countries are procuring more LNG and diesel spot cargoes.