Yesterday Petrokemija announced that it is closing its production facilities of Urea and Ammonia after successfully repairing its technical failure due to business optimization to gas market conditions. Natural gas and CO2 prices in Europe stand at their multiyear highs which is influencing the profitability of their production.
The price of natural gas front month futures became very volatile in the last weeks, but growth subsided when Vladimir Putin, the Russian president, hinted that his country could supply additional gas to Europe. Moving away from classical energy sources has resulted in Europe being very vulnerable to the supply of natural gas, so the lack of supply had sent spot prices last week up by over 60%. Most of entities were trying to get supplies of natural gas ahead of the winter months, which has resulted in strong pressure on natural gas futures which currently stands at USD 5.784 per million Btus, which is 2x higher than its 5-year average (USD 2.82/MM Btu). The price of natural gas futures is currently at 45% of its 15-year average (USD 3.98/MM Btu). In the period from 2000, the price of natural gas future hit the maximum in December 2005, when it was at USD 15.38 /MM Btu.
CO2 prices have also been at their historical high, while rising carbon price in the European Union’s emissions trading scheme has made it hard to switch to other dirty forms of energy. If you want to read more about emission trading, please see visit our blog at this link.