Spot (current for next day) electricity prices in France in January/February 2022 averaged at €199.3/MWh base load and €230.6/MWh peak load, rising strongly compared to January/February 2021 prices, which were €54.5/MWh base load and €66.1/MWh peak load. This increase can be explained by the coal, gas and CO2 prices rise despite a higher wind power generation compared to January/ February 2021. For the same reasons, German spot prices have rose. These prices averaged at €149.3/MWh base load and €182.9/MWh peak load, up by €98.4/ MWh and €121.2/MWh respectively from January/February 2021.
At the end of February 2022, the prices of French yearly contracts for base load and peak load delivery in 2023 were €176.9/MWh and €294.8/MWh respectively. A year earlier, forward electricity prices for delivery in France in 2022 closed at a base load price of €53.4/MWh and a peak load delivery of €66.3/MWh. This rise in prices is mainly due to the rise in gas, coal and CO2 prices.
In January/February 2022, spot gas prices on the French market averaged at €80.5/ MWh, up by €61.4/MWh compared to the same period in 2021. This increase reflects a tighter supply-demand balance in Europe during the winter. Indeed, due to the strong Asian demand linked to the economic recovery, LNG cargoes have favoured the Asian market. European stocks, way below average levels at the beginning of January, continued to decrease and are at their lowest level of the decade. Moreover, this tension on the gas market is growing very strongly due to the Russian-Ukrainian conflict. Indeed, as Russian gas imports represent nearly 40% of the European supply, the gas market reacted strongly to the fear of a shortage of commodities following the sanctions against Russia. The United Kingdom announced at the end of February that it was banning Russian ships from its ports, without explicitly banning Russian cargoes. Finally, Germany announced in the same breath that it would accelerate its restocking to 80% by the beginning of October, thus contributing to the rise in gas prices. At the end of February, LNG flows remained significant and Russian gas flows relatively constant.
At the end of February 2022, the price of Brent was $101.0/bbl, up $34.9/bbl compared with the end of February 2021. In a tight market environment, prices were basically supported by a supply contraction. Indeed, despite OPEC+ announcements in early January that planned an increase in global oil production of 400,000 barrels per day for the seventh consecutive month, a Bloomberg agency study indicated that some countries of the cartel, such as Nigeria and Libya were not able to meet their production commitments. Protests in Kazakhstan, a major producer and OPEC+ member, against gas prices increase were a further threat to supply which also contributed to the upward movement, although no production facilities were affected. On the demand side, the effects of the omicron variant were more limited than those of the delta variant on consumption. Locked in a bullish dynamic, the price of oil responded in mid-January successively to the IEA’s publication which raised its forecast of the 2022 Brent price by almost $5/bbl, and to the unconvincing speech of the FED Chairman to the Senate to limit the dollar inflation. Finally, the escalation of tensions on the Russian-Ukrainian border has reinforced the markets’ fear of a conflict where Russia would stop its oil exports, which would push up the price of a barrel.
The price of coal for delivery in Europe in 2023 ended February 2022 at $215.9/t, up by $147.3/t compared to the 2022 contract closed at the end of February 2021. It has continued its rise at the beginning of 2022, which began in 2021, due to energy crisis last October on the price of gas. With gas prices continuing to soar in early 2022, Europe still needs more coal to rebuild its stocks which reached their lowest level over 10 months in late January. This tension in the coal market has been exacerbated by difficulties in transporting Russian coal by rail and the escalation of tensions between Russia and Ukraine since late January. As a reminder, Russia exports 60% of its coal to Europe which in the event of voluntary or accidental cuts between the parties, could have significant consequences for Europe’s coal supply.
The price of the CO2 emission certificate for delivery in December 2022 closed the month of February 2022 at €82.2/t, up by €44.9/t compared to the closing price in February 2021 for delivery in December 2021. The price of the CO2 emission certificate initially rose to close at €96.9/t on 8 February, its highest level ever. It then stabilized at around €90/t before falling sharply as Russia’s threats against Ukraine increased. At the end of February, the price of carbon stood at €82.2/t, down €7.0/t over one month and €14.7/t from its all-time
