Wholesale gas prices down 37% to a six-year low says Vayu
WHOLESALE gas prices in Northern Ireland are down more than a third on a year ago and sit at a six-year low, a new report from Vayu Energy reveals.
The price plunge has been driven by an abundant supply and weak demand, and it has had a significant impact on the energy costs of many businesses in the north purchasing gas on the wholesale market, particularly for users in the industrial and commercial segment.
According to Vayu's latest energy market report, wholesale gas prices are 37 per cent lower on average so far this month compared with March 2015 and down 36 per cent year on year for the first quarter.
But while prices are largely unchanged compared with February, they remain at lows not seen since April 2010 says Vayu, which recently announced its expansion into Northern Ireland.
The average day-ahead price for gas – the contract for gas delivery for tomorrow – is 29.78p per therm so far in March compared with 47.29p/th a year ago.
Wholesale gas prices have now fallen by 53 per cent compared with the average monthly price recorded for March over the previous three years (2013-2015), which has had a significant impact on the energy costs of many businesses in Northern Ireland purchasing gas on the wholesale market, particularly for users in the industrial and commercial segment.
Joanne Daly, senior energy analyst at Vayu, claims the gas market remains oversupplied this month with strong supplies of LNG (liquefied natural gas) from the Middle East expected to continue as we approach the summer months.
“An oversupply of gas and weak demand mean Europe's inventory levels are significantly above normal for this time of year, and this has resulted in a dramatic collapse in wholesale prices,” she says.
“New volumes of LNG this year from the US and Australia and seasonal falls in demand are likely to result in further downward pressure on prices. There's therefore limited risk of significant price increases in the near term, barring any unplanned outages.”
On the impact of oil on longer term gas prices, Ms Daly believes unrest in Turkey and Iraq has created price volatility on the Brent crude oil market (Brent is currently trading above $39 per barrel, having been valued above the $41 mark since March 16).
“Oil prices are likely to continue to influence longer term gas contracts, with the market awaiting the outcome of a meeting between OPEC and major non-OPEC members scheduled to take place on April 17," she said.
"A decision to freeze production could provide significant upward support to the oil market which in turn could result in higher wholesale prices for gas contracts.”
Away from gas, Vayu said the average wholesale price of electricity so far during March is 28.87 £/MWh – a decrease of 25 per cent compared with March 2015 and an increase of 2 per cent compared with last month.
And increased wind energy now plays an ever more important role in meeting Northern Ireland's electricity demand, with 17 per cent being met by renewables so far this month.