Blog
It’s going to cost EUR62 Billion to meet new EU gas storage legislation
The European Commission proposed new legislation stating that countries would need to ensure gas storage sites reach 80% filled by 1st November. This is an attempt to ensure security of supply in the coming winter. However, with the current high prices seen in the market, partly driven by the conflict in Ukraine, the cost to reach this milestone based on current market prices, is significant.
Price Cap Rises to £1971
Shakespeare’s Richard III proclaimed that “Now is the winter of discontent”; with the announcement this morning of Ofgem’s price cap level for summer 2022, are we now heading towards a summer of discontent?
Deeper dive into European Gas Storage
We've seen a lot of discussion on how Gazprom owned/controlled gas storage sites have significantly lower inventory than seasonal norm, and our initial analysis shows that other site owners also have reduced volume.
Major European countries are 25%-40% short on gas inventories vs seasonal norms.
While we've discussed the position on Europe being ~15% short in aggregate, it's also important to look at the underlying position to find the drivers.
What's the risk of buying energy Day Ahead?
We were asked recently on what the risk/impact of buying energy Day Ahead, my initial view was 'more expensive in a risking market, cheaper in a falling market'.
As we firm up the level of the S-22 Price Cap, any unhedged customers will create significant losses
While customers continue to be individually protected by the Price Cap, the volatility in the wholesale markets means that any unhedged customers are likely to be loss making even at the projected ~£2,005 level of the Summer-22 Price Cap.
Price Cap level contracts are almost 100% underwater
Near term wholesale energy prices continue to increase across Europe, with significant increases in all along the forward curve.
The multi-billion cost of supplier failures
As price volatility continues and further supplier failures are expected, the energy industry is looking ahead to April with the hope that the market may start to resemble something a little more normal and the impact of this winter will ease. Whilst it may be some time before we have full certainty, some consequences are already known.
Henry Hub prices present material arbitrage opportunity in Europe
Bloomberg reporting this morning that 30 Tankers of LNG are en route from the US to Europe. The tankers contain a total of 4.9 million cubic meters of LNG, which if I've got my maths right is ~1bn therms / ~32TWh - valuing the cargo at more than £4bn.
European Gas Storage Levels At Risk Of Dropping to ~5% of Capacity By Late March
European Gas Storage Levels At Risk Of Dropping to ~5% of Capacity By Late March. Without from fundamental structural changes we are at real risk of gas scarcity across Europe by late March.
BFY In The News
From time to time, our team are asked to provide expert insights in the News and Press.
We can make £1b worth of energy efficiency savings, and help mitigate more supplier failures.
John Baldwin made a blindingly obvious, but superbly simple comment this week. We're in the middle of an energy crisis and yet there is deafening silence when it comes to energy efficiency advice and helping customers to use less energy.
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