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END OF DAY – Gas, coal seek direction amid mixed drivers

(Montel) European benchmark gas and coal contracts rose marginally in late Friday trading, amid some supply uncertainty, but relatively high stocks and tepid demand would cap gains, market participants said.

The benchmark front-month TTF gas contract was last seen up EUR 0.46 at EUR 29.46/MWh on Ice Endex, after earlier touching an intraday low of EUR 28/MWh.

And the front-month API 2 coal contract was USD 1.15 higher at USD 96.50/t, on Ice Futures.

Jonathan Howells, head of trading at Eco Logic Partners, said a mixture of bearish and bullish sentiment had left the European gas market “seeking direction”.

“It’s torn between comfortable gas stocks at this time of winter due to the mild winter and lower gas for power demand, and the bullish factors that have emerged in recent days such as forecasts of colder weather and supply concerns,” he said.

Supply concerns included delays to Qatari LNG vessel arrivals, as ships avoided the Red Sea conflict zone, and an outage at part of the Freeport LNG facility, the second biggest export terminal in the US.

“But objectively, the bearish elements largely outweigh the bullish elements,” Howells said.

A portfolio manager with a German energy firm agreed, noting coal and gas were moving “hand in hand”.

“It’s an oversupplied market across the energy complex,” he said.

“And the worst is yet to come, with Q2 the weakest period of the year [for demand],” he added.

Carbon support
Meanwhile, the Dec 24 EUA carbon contract was last seen up by EUR 2.19 to EUR 64.38/t on Ice Endex, though bearish sentiment was expected next week, reflecting gas price trends.

The carbon market has been under pressure due to warmer temperatures and abundant gas supplies, resulting in reduced gas prices and a decline in coal-fired generation.

Market participants are also keeping an eye on the European Commission’s unveiling of its 2040 carbon emissions target on Tuesday, though this is not expected to boost EUA prices, analysts said.

"Although no one expects any surprises in this release, there's a lot of sentiment trading around those big announcements," said Vertis carbon analyst Riham Wahba.

"So this could be one of the reasons why we've seen this untick in prices this week," she said, noting the support could be sustained until Tuesday.

"It is unlikely to continue beyond that unless we see, for instance, a reversal in gas prices," she added.