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26% Drop in Irish Wholesale Gas Prices in November Compared with last year

  • Norwegian gas exports approach all-time record high
  • 21% drop in Irish wholesale electricity prices year-on-year
  • 29% of total electricity demand in Ireland met by wind energy in November 

Monday, 30th November 2015: Irish wholesale gas prices are 26% lower on average in November compared with November 2014 and 6% lower compared with last month, 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 a surge in Norwegian supply, which has reached near-record levels. Subdued gas demand is also having an impact on foot of milder weather conditions compared with last November.

In euro terms, the average day-ahead price for gas – the contract for gas delivery for tomorrow – is 1.73 c/kWh in November. This compares with an average price of 2.33 c/kWh in November 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 34% in sterling terms year on year, reaching five-year lows.

Irish wholesale gas prices are now 35% lower (euro terms) compared with the average monthly price recorded for November 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.

Gillian Lawler, Senior Energy Analyst at Naturgy says: “Bearish sentiment has taken a firm hold of the market with gas prices experiencing significant downward pressure as a result of strong exports from the North Sea and Russia. Increased gas supply and lower weather-driven demand are more than offsetting the effect of reduced output from the Netherlands and lower gas storage levels in Europe year-on-year.”

Commenting on longer term gas prices, Ms Lawler states: “With Brent Crude now 43% lower than a year ago, the collapse in oil prices is resulting in significantly weaker oil-indexed gas contracts for next summer and further out. Production from Libya and Iran is due to come online early next year and this will add further to the current supply glut. Any recovery in oil prices is therefore expected to be gradual.”

Meanwhile Europe continues to experience robust supplies of LNG (liquefied natural gas) from the Middle East, with LNG accounting for approximately 20% of the gas supply mix for the UK and Irish market so far this year. Strong LNG supplies are set to continue into the future, driven by weak demand in Asian gas markets.

Ms Lawler notes that, despite robust supply levels, inventories in major European storage hubs are still down compared with last year, with most facilities having delayed replenishing inventories until cheaper oil-indexed gas became available. As a result, UK storage levels currently stand at 89% capacity compared with 99% capacity this time last year.

Electricity and Renewables Update

The average wholesale price of electricity in the Irish market so far during November is 4.59 c/kWh – a decrease of 21% compared with November 2014 and down 7.5% compared with last month. The drop in prices is attributed to strong wind generation and lower prices for gas, which is the main energy source used to generate electricity in Ireland.

Total wind generation capacity in Ireland now stands at 3,030 MW. Wind energy has accounted for 29% of overall electricity generation in Ireland so far during November, reaching a peak of 2,509 MW on the 9th of November when it met 42% of demand at the time. Some 26,796 gigawatt hours (GWh) of wind energy has been generated in Ireland since the start of the year, representing 22% of total electricity demand during this period