EU Fuel-Switching Continues

EU Fuel-Switching Continues
EU Fuel-Switching Continues

Fuel-switching by power generators in the European Union has continued in recent weeks with lower natural gas prices, although the potential for a further decline in coal-fired generation is now very limited, analysis by S&P Global Commodity Insights showed.
Despite some recent gains on the key European trading hubs, natural gas prices have seen ample losses in recent weeks, with S&P Global assessing the TTF July contract at $29.25/MWh on June 8, S&P Global reported.
This was above the recent multi-year low for any front-month of $25/MWh registered on June 1, yet 27% below levels seen in early May.
"The dynamics of the market have changed. Coal is just not cost-effective. Even with the current multi-year low coal prices, it is still cheaper to switch to gas," a Europe-based coal trader said.
Many traders are expecting gas prices to slip to recent lows soon, provided nothing changes fundamentally.
"In a context of recession and slow Chinese demand reemergence, we can envision a scenario where gas goes a little lower if there is no LNG demand from Asia," a gas trader operating in Northwest Europe said. 
The TTF July price could ease to $23.66/MWh, once the uncertainty around the recent Norwegian unplanned outages clears.

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