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Irish wholesale gas prices are 26% lower on average so far in December compared with December 2014 according to the latest Wholesale Energy Market Report published by Naturgy Energy. The company, which supplies gas to over 20% of Ireland’s industrial and commercial market, states that the year-on-year decrease in prices is due to strong supplies, exceptionally mild weather conditions for December and a positive storage outlook.

The average day-ahead price for gas – the contract for gas delivery for tomorrow – is 1.71 c/kWh (cents per kilowatt hour) so far in December. This compares with an average price of 2.31 c/kWh in December 2014. A fall in the value of the euro against the pound sterling over the last twelve months masked an even greater drop in prices on the UK wholesale gas market, the source from which Ireland purchases its natural gas. Prices this month are down 33% in sterling terms year on year, lows not seen since September 2010.

Irish wholesale gas prices are now 35% lower (in euro terms) compared with the average monthly price recorded for December over the previous three years (2012-2014). This has had a significant impact on the energy costs of many Irish businesses purchasing gas on the wholesale market, particularly in the industrial and commercial segment.

Joanne Daly, Senior Energy Analyst at Naturgy says: “Gas prices are now at lows not seen since September 2010. This is due to a combination of low demand and strong supply. Mild weather conditions have been a major factor with temperatures significantly above seasonal norms during the month and it is expected to remain mild at least up until Christmas Eve, further driving down demand for gas.”

Ms Daly notes that wind power potential is expected to be high over this period, leading to a decrease in gas use in the power sector. Toward the end of December, industrial and commercial demand is also set to drop due to a large volume of businesses closing for the holiday season.

“Gas inventories are currently very healthy with storage levels now close to record highs for this time of year. Mild weather conditions have driven demand so low this month that it was possible for storage injections to take place – a situation usually unheard of in December,” says Ms Daly. “As a result, there is now minimal risk of any significant upward pressure on wholesale gas prices barring an unforeseen outage.”

Commenting on longer term gas prices, Ms Daly states: “The global supply glut in oil has seen Brent Crude fall 38% lower than a year ago, and close to lows not seen in over a decade. This collapse in prices is resulting in significantly weaker longer dated contracts for next summer and further out. Additional production from Libya and Iran is expected to come online in the New Year which will add further to global supply meaning any recovery in oil prices is likely to be gradual.”

Electricity and Wind Energy Update

The average wholesale price of electricity in the Irish market so far during December is 4.61 c/kWh – a decrease of 27% compared with December 2014. The drop in prices is attributed mainly to lower prices for gas, which is the main energy source used to generate electricity in Ireland. Strong wind generation is also a factor, accounting for 33% of overall electricity generation in Ireland so far during December. Wind energy reached a peak of 2,518 MW on the 1st December when it met 52% of demand at the time.