OCTOBER 2016 Irish wholesale gas prices increase 39% in October due to market nomalisation and a seasonal price adjustment but remain 14% lower year on year

  • Electricity prices increase 4.6% year on year
  • Wind energy accounted for 22% of overall electricity generation so far in October

In euro terms, Irish wholesale gas prices are 14% lower on average this month compared to October 2015. This is due to continued healthy supply, lower oil prices and decreased demand. However, the average wholesale gas price this month is up 39% compared to last month. A significant supply overhang pushed the prompt market to lows not seen since 2009 during the first half of September, so the month on month increase is a normalisation of the market.

Gas prices gained over 8p in sterling terms in the first four days of October trade. The impact in cent/kWh was limited by the weakness of sterling to the euro, enabling Irish and euro businesses to enjoy more competitive prices than UK businesses which saw wholesale gas prices increase 5% year on year and 46% month on month.

The average day-ahead price for gas, the contract for gas delivery tomorrow, is 1.59 c/kWh (cents per kilowatt hour) for October so far. This compares with an average price of 1.85 c/kWh in October 2015. In euro terms, Irish wholesale gas prices are 29% lower compared with the average monthly price recorded for October over the three previous years (2013 – 2015).

Gillian Lawler, Senior Energy Analyst at Naturgy Energy said that contracts were driven by movements in both the EUR/GBP exchange rate and Brent crude at the beginning of the month. “A stronger euro relative to the pound and gains made on oil pushed curve contracts up. The pound fell relative to the euro following the announcement that the UK will begin the process to leave the EU by the end of March 2017. The current outlook is for contracts to stay in positive territory with the rally in oil expected to continue and weakness of sterling still holding.

An informal OPEC meeting on proposed output cuts on 6 October helped oil prices firm and they hit four month highs. Oil jumped by more than $6/bbl since the group announced at talks on 28 September that it hopes to reduce output to 32.5 / 33 million barrels per day. This would remove 700,000 barrels per day from the global supply glut. Associated gains on gas contracts were capped somewhat as the pound plummeted to its lowest level since March 2010. Oil soared to its highest point of the year on 10 October with Russia announcing that it is willing to join the production cut agreed by OPEC members. Gas contracts made gains initially, but these were not sustained due to concerns that the supply cut may not in fact stem the global oil over-supply. Uneasiness will continue on oil markets until the OPEC meeting of 30 November to firm the agreement on production cuts. The remainder of winter is trading around 47p while Q1-17 is 48.9p. Volatility is expected to continue to a degree based on oil and FX fundamentals, along with some storage and LNG delivery concerns”.


Electricity and Wind Energy Update

The average wholesale gas price of electricity in the Irish market so far in October is 5.2 c/kWh, an increase of 4.6% compared with October 2015 and up 44% compared with last month. The month on month surge in prices is attributed mainly to a return to a more balanced supply picture following the oversupply experienced in September, and a seasonal price adjustment on wholesale gas prices.

Total wind energy capacity in Ireland now stands at 3,169 MW. Wind energy accounted for 22% of overall electricity generation so far in October, reaching a peak of 2,396 MW on 3 October having the potential to meet over 49% of total electricity demand on the island of Ireland at that time.