While natural gas prices rose to a record high, the prices of carbon permit contracts also rose, and demand for electricity generation from coal increased.
The energy crisis is getting worse as winter approaches, as gas and carbon permits in European energy markets broke records on Tuesday. While the Dutch 1-month natural gas contracts climbed to 84 euros with an increase of 11.6 percent, the price of carbon permit contracts increased by more than 2 percent to over 65 euros, breaking a record.
The actual purchase was made well above the European benchmark price, indicating that China is willing to allocate more money for fuel as the energy crisis deepens.
U.S. natural gas futures rallied to their highest level since February 2014, fueled by growing concerns about tightness in inventories and global supply tightness. October futures contracts rose 5% to $5.98 on the Nymex market.
Spot natural gas price in Turkey broke the record by climbing up to 2 thousand 512 TL per thousand cubic meters on September 27. Spot Natural Gas prices were at the level of 2 thousand 185 TL at the beginning of September.
It is thought that the government will try to prevent the incoming wave of price increases but will not be successful in preventing price increases due to the dry season and current reservoir occupancy levels.
Back to Coal
Electricity producers turned to coal as the increase in natural gas prices reduced the profit margin for electricity generation. With the producers turning to coal, the cost of carbon emission permit contracts in Europe has more than doubled in a year.
According to Bloomberg NEF’s report, electricity generation from lignite has become more profitable with rising energy prices.
With the increase in electricity production from coal due to the cost pressure in natural gas, the demand for carbon emission permits also increased within the scope of the Emissions Trading System.