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Watch: Market Movers Europe, Aug 2-6: UK hydrogen strategy in focus, as Europe battles for gas for the winter

In this week's highlights: The UK announces its hydrogen strategy this week; European gas markets are fretting about whether low storage levels will cause problems this winter; BP closes out what has been a promising Q2 corporate results round for the oil and gas majors; and EU carbon auction volumes will more than halve in August, raising the possibility of price spikes.

  • UK hydrogen strategy announced this week (00:20)
  • Lower EU gas storages expected (01:25)
  • Oil companies pull out of high-carbon areas (02:10)
  • Carbon prices could see more price volatility (02:57)
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In this week's highlights: European gas markets are fretting about whether low storage levels will cause problems this winter; BP closes out what has been a promising Q2 corporate results round for the oil and gas majors; and EU carbon auction volumes will more than halve in August, raising the possibility of price spikes.

But first, in energy transition news, the UK government is expected to release its long-delayed hydrogen strategy this week, a key component of its net-zero strategy ahead of the COP26 climate talks the country is hosting in November.

It is expected to detail support for developing green hydrogen, powered by renewables, and blue hydrogen derived from fossil fuels with carbon capture and storage, currently much cheaper to produce, as you can see in this chart.

The industry expects measures for contracts for difference, as well as incentives for hydrogen use in industry and heavy transport, though new funding is likely to be limited.

The government has previously set a target of one gigawatt of low-carbon hydrogen production capacity by 2025, and five gigawatts by 2030, supported by a 240 million pound fund.

And that takes us to our social media question for the week: Is the UK right to prioritize natural gas-based production of hydrogen with CCS? Tweet us your thoughts using the hashtag #PlattsMM.

In natural gas, the benchmark Dutch TTF price broke through the 40 euros per megawatt-hour mark for the first time ever last week as European markets continued to battle to attract global LNG supply into the region.

With EU gas storage sites currently only 55 percent full, concern that stocks won't reach a suitable level ahead of the winter has played a big part in pushing gas prices up. A key question -- and one likely to continue to drive market fundamentals -- is how full European storage sites will be by the start of the withdrawal season. According to Platts Analytics, northwest European storages are expected to reach just 85 percent full by the end of October, having started the previous two winters at nearly 100 percent capacity.

In oil, we're close to the end of corporate results season, with BP set to report on Tuesday, and the signs so far being that the oil and gas majors have managed to weather the pandemic and, they hope, emerge stronger.

The market is also closely watching ongoing efforts by some companies to pull out of less profitable, or high-carbon emitting areas. Any comments by BP on its flagship Rumaila oil project in Iraq will be of particular interest at a time when Iraq's oil prospects are looking somewhat less assured.

Platts expects to release its survey of OPEC+ oil producers in the coming days, with the group due to have increased its production by 840,000 b/d in July, assuming full conformity with quotas.

And now to the EU Emissions Trading System, where carbon allowance prices are holding up at well above 50 euros per metric ton of CO2 equivalent - more than double their average price in 2020.

Carbon prices have come off the all-time highs reached in July, but August could see more price volatility with governments set to cut auction volumes by more than 50% compared with July levels. This is timed to avoid a price collapse in the summer vacation period when many traders are away. Nevertheless, the reduced flow of primary EUAs into the market could prompt price spikes in what is traditionally a month of thin trading.

The Platts Atlas of Energy Transition is your map to the sustainable commodity markets of the future. You can explore the Atlas by visiting the address displayed on your screen.

Thanks for kicking off your Monday with us and have a great week ahead!