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Market Movers Europe, Nov 1-5: COP26 conference, oil and natural gas supply tightness in focus

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Watch: Market Movers Europe, Nov 1-5: COP26 conference, oil and natural gas supply tightness in focus

In this week's highlights: The hugely anticipated COP26 climate conference gets underway, bringing the challenges of the energy transition firmly center stage for the next two weeks, while in the background markets will be hoping for indications of relief to the supply tightness that has driven the remarkable recent rallies in traditional energy markets.

  • EU goes to COP26 with background grumblings (00:19)
  • OPEC+ meeting, BP under scrutiny (00:57)
  • Increased Russian gas flow: Putin (02:40)
  • Belgian capacity market results awaited (03:31)
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In this week's highlights, the hugely anticipated COP26 climate conference gets underway, bringing the challenges of the energy transition firmly centre stage for the next two weeks, while in the background markets will be hoping for indications of relief to the supply tightness that has driven the remarkable recent rallies in traditional energy markets.

But first, EU leaders go into the UN's Climate Change Conference in Glasgow with the bloc's radical "Fit for 55" package of proposals under attack from some quarters. The bulk of Member States back the program to cut emissions by at least 55% by 2030, but Poland, the Czech Republic and Hungary have challenged the pace and nature of the reforms.

And while coal is being phased out across much of Europe, as you can see in the chart, German coal plants in particular are enjoying a purple patch of profitable output due to the gas crunch, making for awkward optics going into the talks.

Not only coal, of course, the world's continued reliance on oil and gas is raising awkward questions for the meeting in Glasgow.

On Thursday, OPEC+ countries are set to hold their scheduled monthly meeting, where they will discuss further easing of production constraints imposed in response to last year's demand collapse.

In the run-up, the US Administration has actually been calling for greater oil production by OPEC+ countries, led by Russia and Saudi Arabia. On the other hand, oil market bears fear China's 'zero Covid' strategy, combined with Covid upticks elsewhere, could put a break on further price rises.

Saudi energy minister Prince Abdulaziz bin Salman is expected to address an Economist conference on Tuesday ahead of the OPEC+ meeting, but has already signalled his expectations that the group will stick to its plans for regular monthly increases of 400,000 b/d in December.

Meanwhile BP is the last of the majors to publish Q3 results on Tuesday, with surging commodity prices expected to provide a financial boost, but the sector still trying to get back on track after a range of maintenance issues and Hurricane Ida in the Gulf of Mexico.

BP's plans for decarbonising heavy industry along the English coast through carbon capture and storage and hydrogen projects, and for reducing its oil and gas output are winning the company support among traditional critics. But recent concerns over European security of supply and dramatic price spikes mean BP remains a litmus test for the energy transition.

And that brings us to our social media for the week: What impact do you think the decarbonisation of the oil industry will have on production capacity? Tweet us your thoughts using the hashtag #PlattsMM.

In European gas, the market will again be watching out for any signs in changes to Russian supply after comments by Russian President Vladimir Putin last week led to a sharp decline in gas prices. Putin said he has ordered gas giant Gazprom to begin refilling its gas storage sites in Germany and Austria as soon as it has completed the domestic gas injection program on November 8. Spot European gas prices slumped after Putin's comments, though they remain at historically high levels. The market will be closely monitoring Russian flow and nomination data to see whether gas does indeed make its way into Gazprom's European storage sites in November. The current high gas prices in Europe have been partly attributed to concern over low levels of European gas storage - especially at Gazprom sites -- ahead of the upcoming winter and lower-than-expected Russian imports.

Meanwhile, the results of Belgium's first capacity market auction are expected this week as the country is seeking to offset the impact of nuclear closures to 2025. All eyes are on awards to large new gas-fired power stations, several of which have battled local opposition in order to bid into the competition.

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!