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November 2019: Wholesale gas prices down 60% year on year and up 4% month on month

Wholesale energy prices remain low and wind performance in October shows the influence of renewables on reduced electricity costs

  • Wholesale gas prices down 60% year on year and up 4% month on month
  • Wind contributed 54% of October’s generation mix, up 22% on September prompting a decline in prices
  • Brent oil prices 20% lower than last year and slow international economic growth could see supplies cut to maintain prices
  • Carbon prices volatile in October due to Brexit fears with outlook hinging on developments in UK parliament 

 Naturgy has released its Monthly Energy Review for October and it shows that the outlook for energy prices remain low overall, but with some volatility experienced during October.

October saw electricity prices falling almost 7% month on month, averaging at 4.12c/kWh, with renewables accounting for a healthy 54% of the generation mix. Wind generation was up 22% from the previous month, the principle driver of the drop-in prices.

 “The Monthly Energy Review is an important tool in monitoring developments across all aspects of the market. This month it was particularly interesting to see the effect renewables can have on electricity prices” said Lauren Stewart, Analyst, Naturgy Ireland.

“Seasonal demand will place pressure on the current prices, but a weak gas market and the strong performance from wind generation are helping to mitigate this.” she added.

October marked the one year anniversary of the new Single Electricity Market (SEM). The day ahead market has performed competitively, with prices dropping over 34% year on year.

Natural gas prices started October with some sharp gains but the milder weather during the month helped to push demand for gas down, softening prices again. With a mild start to November predicted and 6 Liquified Natural Gas (LNG) cargoes due to land in the UK early in the month, it would be difficult to see near curve prices increasing toward the levels experienced last year.

Brent oil prices are currently trading 20% lower than this time last year. Healthy storage levels as well as flexible supply have allowed prices to remain relatively stable in recent weeks, despite global events. With doubts being cast over economic growth internationally demand for oil may be expected to drop; however, OPEC will meet in December and could consider cuts in supply that would create some bullish movement in an otherwise neutral market.

Naturgy states that carbon prices experienced a volatile October with a sharp drop in prices on the back of no deal Brexit fears. However, price levels increased after an apparent agreement was reached. The carbon price outlook hinges upon whether the UK will exit the EU with a deal. Carbon prices will likely take direction from the next steps taken by UK parliament and gains may be seen with the extension of the withdrawal date to 31 January 2020.

For more information, visit www.naturgy.ie