Mar 10, 2023
European Energy Prices Spike Amid Supply Woes in France
(Bloomberg) -- European energy prices soared amid concerns about France’s nuclear fleet and disruptions due to widespread strikes, along with a late-winter cold blast in other parts of the region.
Benchmark natural gas futures settled 21% higher, the biggest jump since June. French year-ahead power surged 16%, the most in more than six months.
Traders are closely monitoring the market for any potential factors that could affect gas and power prices, after both slumped recently. Defects discovered at two French nuclear reactors have raised concerns about the long-term health of the nation’s fleet, while strikes are set to upend operations at energy facilities into next week.
France’s four liquefied natural gas terminals remain blocked by the labor action, which is currently expected to continue until March 14.
While the country was a net power exporter on Friday — thanks partially to strong wind generation — strikes at Electricite de France SA’s facilities curbed its capacity by 11.2 gigawatt in the morning. The company’s workers also plan to strike again next week, adding to market tremors.
Separately, EDF this week announced that it discovered new defects at two nuclear reactors that were halted for maintenance and repairs. That’s renewed concerns that the company’s electricity output will remain largely constrained this year after plunging in 2022.
Traders are awaiting further news on both the reactors and strikes that are affecting the nation’s energy sector, just as a TotalEnergies SA refinery extended its strike action until the evening of March 16.
The incidents in France occur against a backdrop of colder weather in northern Europe, particularly Scandinavia and the UK, which is lifting demand.
“This enduring winter is giving us one last frosty bite,” analysts at Zenergi Group said in a note. “The week is proving a major test for the markets, with evidence of volatility starting to build back in.”
Even though Europe has higher-than-normal gas inventories, the cold snap is leading to withdrawals late in the season. The market is also focused on demand for liquefied natural gas in Asia, Europe’s key competitor for the vital fuel.
A recent slump in LNG prices has led to increased activity from importers, including from Chinese buyers.
LNG WRAP: Asia Prices Rise as China Purchases Some Cargoes
Dutch front-month gas, Europe’s benchmark, settled at €52.86 per megawatt-hour, a level last seen in February. French power for delivery in 2024 soared to €205.75 a megawatt-hour. Next-month electricity prices in the country also rose.
Britain resumed gas exports to mainland Europe through its interconnector with Belgium, after flows were halted for a few days amid outages in the UK. Its month-ahead gas futures advanced on Friday.
“Contracts climbed to attract spot LNG cargoes to help combat surging demand with colder temperatures,” said UK supplier SEFE Energy Ltd. “Newfound issues within the French nuclear fleet also added to the pressure.”
--With assistance from Todd Gillespie, Francois de Beaupuy and Anna Shiryaevskaya.
©2023 Bloomberg L.P.