Short-term power prices have remained very high across Europe this month, with yet another heatwave and the ongoing drought impacting both supply and demand. While cooler and windier conditions are expected over the next few weeks, the impact on gas demand, against a backdrop of low LNG (Liquified Natural Gas) supply, will continue to be felt in the weeks and months ahead.
On top of the current aggressive prices, further support for longer-term contracts has come from the lack of progress towards reopening the Strait of Hormuz, amid an apparent deadlock in peace talks between the US and Iran despite the ongoing ‘ceasefire’. Headlines remain volatile and at times contradictory, with both sides, for example, claiming to have control of the Strait. For now, oil and LNG cargoes are not moving, gradually increasing the pressure on Winter 26 prices, particularly with European gas storage currently only 59.4% full, with the EU mandatory target of 80% storage capacity to be achieved by the end of September! Europe’s storage deficit continues to widen, nearly 13 percentage points below last year, making a start to winter with near historic storage lows increasingly likely. This also raises the risk of a tight spot market in the event of prolonged cold weather or supply disruptions and is likely to continue supporting prices.
Across much of Europe, extreme heat and drought have continued to constrain power generation, affecting thermal and hydro output in Italy. In France, EDF’s heat-related nuclear curtailments are expected to peak this week at just 16.9% of its capacity, with pressures also reported in Poland, Hungary, Romania and Slovenia due to the inability to cool the reactors with river water due to low levels and high-water temperatures.
