Rare Snow Blanketing Madrid Creates Energy-Market Chaos

Spanish natural gas prices surged to a record as the nation grappled with unusually cold weather that even brought a rare snowfall to Madrid.

The day-ahead price on Spain’s PVB gas trading hub has more than doubled since the start of the year and is near the record-high rates for liquefied natural gas in Asia, where cold winter temperatures are creating fuel shortages.

Rare Snow Blanketing Madrid Creates Energy-Market Chaos

Spain is a key part of the global LNG market, with more terminals for the super-chilled fuel than any other country in Europe. Higher gas prices, coupled with lack of available LNG vessels for longer journeys between Europe and Asia, will probably limit exports of cargoes from the nation’s ports and further tighten supply of the fuel.

Gas prices have soared across Europe as the widespread cold snap boosted demand for heating and power generation. It adds to the sharp rebound for the market after Covid-19 disruptions sent benchmark rates to the lowest in more than a decade in 2020.

Rare Snow Blanketing Madrid Creates Energy-Market Chaos

In central to eastern Spain, “an abundant amount of snowfall is forecast” to fall in combination with the colder-than-normal temperatures, weather forecaster Maxar said in a note. In Madrid, as much as 20 centimeters (8 inches) of snow may accumulate within 24 hours from late Friday, according to a warning by Accuweather.

Madrid one-month temperature outlook:

Rare Snow Blanketing Madrid Creates Energy-Market Chaos

Spanish day-ahead gas hit a record 51.55 euros ($63.13) a megawatt-hour Thursday, or $18.54 per million British thermal units. The contract traded at 50 euros a megawatt-hour on Friday.

Exxon Sells LNG Cargo to North Asia for Mid-$30s

One tanker set off from Huelva, Spain, for Bangladesh earlier this week, and one more cargo is scheduled to be reloaded from the Sagunto import terminal on Jan. 22, according to network operator Enagas SA.

©2021 Bloomberg L.P.

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