A fair wind on the energy markets

• The US benchmark Henry Hub gas futures for prompt delivery dipped over 11% this week before settling 7.5% lower than Monday.
• Woodside Energy Group ASX:WDS (WDS) is lower by 4.5% on Wednesday.
• Better than expected number of production outages resulting from the US polar blast over the Christmas weekend, strong US production and exports, and windier and warmer weather in Europe are all serving to pressure UK and European gas and power prices.

Lower prices

High winds and warmer air over northern Europe have sent gas and power prices plunging for the UK and across the continent.

After narrowing on EUR 350/ MWh in August, the critical European gas benchmark of Dutch TTF has fallen back over 75% of late to the last close near the EUR 80 / MWh handle.

Lower energy prices are welcomed by European consumers and policymakers grappling with stubborn inflation.

Lower energy prices create a healthy Europe

Lower energy costs can reduce production costs for businesses, leading to increased competitiveness and profitability, stimulating economic growth and creating jobs.

Lower energy prices can also lead to lower prices for goods and services, as energy is a significant input cost for many industries. Reducing prices leads to increased consumer spending, which will boost economic activity.

Lower energy prices can also lead to increased investment in energy-intensive industries as the cost of production decreases. That can lead to further economic growth and job creation.

Reduced energy prices can also lower the trade deficit for countries that import energy, as they will have to pay less for supplies. That will improve the overall balance of payments for those countries and contribute to a more robust economy.

Overall, lower energy prices can positively impact Europe’s economic outlook by reducing costs for businesses and consumers, stimulating economic growth, and improving the balance of payments for energy-importing countries.

A healthy Europe is a healthy world

Europe is a significant player in the global economy, and a robust European economy can help to drive global economic growth. This can lead to increased trade and investment, which can benefit other countries worldwide.

A solid European economy can also provide more opportunities for international companies to do business in Europe, creating jobs and stimulating economic activity in other countries.

Europe is home to many multinational corporations, and a positive economic outlook for Europe can lead to increased profits for the companies. That can result in increased investment and economic activity in other countries where the companies operate.

A positive economic outlook for Europe can also lead to increased demand for goods and services from other countries, boosting exports and helping to stimulate economic growth.

Overall, a positive economic outlook for Europe can positively impact the global economy by driving growth, creating opportunities for international companies, and increasing demand for goods and services from other countries.

Summary

The downward shift of gas prices, despite the hugely reorganised supply chains, and during peak demand in the dead of winter, is a massive plus for European consumers, businesses and policymakers.

The worst outcomes of power outages are less likely in the immediate future, and business planning for 2023 can become a little more concrete. A stronger Europe means a stronger world, and these latest developments in the energy markets are most welcome.