High production from renewables and falling demand put pressure on gas prices

Graph 1: TTF natural gas price trend and comparison between financial markets

The drop in prices is due to the fact that favorable fundamentals have returned to guide market participants: higher temperatures and strong renewable production have eased the concerns of the past few weeks. The gradual reduction in demand combined with a slight increase in supply is favoring an increase in storage filling activity, after the slowdown of recent days. As regards Norwegian flows, it should be noted that a new series of scheduled maintenance will start from May 21st, which will also extend into the month of June.

Petrolium

After the biggest loss in three months last week, Brent futures closed at 82.8 $/bbl while WTI at 78.3 $/bbl, respectively a decline of 0.2% and an increase of 0.2% on a weekly basis.

Graph 2: Oil price trend

The prospect of maintaining current interest rates for a longer period than expected, a factor that could damage oil demand, led to a collapse in prices over the weekend, which was however offset by the absence of an agreement between Israel and Hamas despite intense negotiations and continuous Ukrainian drone attacks on Russian refineries. The market was also impacted by US inventory data, which showed unexpected growth in gasoline and distillate inventories, confirming the perception of stagnant demand.
The Fed’s comments over the weekend highlighted some reluctance to cut interest rates in the near term. However, if gasoline prices remain stable over the summer, especially if U.S. refineries increase production, the Fed may consider a rate cut earlier than expected. The decline in refining margins, especially for diesel, has suggested the hypothesis of production cuts: in Asia some refiners have already reduced their output, while OPEC+ evaluates whether to further reduce production in the second half of the year, while finding some members to disagree, particularly Iraq.

Thermal Carbon

The API2 coal futures price (June contract) remained stable over the week, closing on Friday at $106.9/t.

Graph 3: Price trend of thermal coal in Europe

U.S. exports are rising on the East Coast as efforts continue to clear the Baltimore Canal after the bridge collapse. Meanwhile, coal demand in Europe remains very weak, with Germany reducing coal-fired electricity generation by 70% in 2024 compared to the previous year.
Regarding API2, prices appear to be well supported on the supply side, especially after the latest US sanctions on Russian coal producing companies, which have created problems for countries that still import it. Regarding production, Glencore reported a decline of 7% on a quarterly basis and 2% on an annual basis: the latter data signals a weakening of demand, which together with high levels of inventories on the markets and lower gas and LNG prices , make us hypothesize a neutral if not bearish vision in the medium to long term.