Business

No sign of end to falling wholesale gas prices

Wholesale gas prices have hit a ten-year low

ABUNDANT supply and decreased demand have seen wholesale gas prices to a 10-year low.

They are 40 per cent lower than this time last year while wholesale electricity prices are down 29 per cent year-on-year.

The statistics were included in the latest Business Energy Report by Vayu Energy which also found that 17 per cent of Northern Ireland's electricity demand this year had been met by wind energy.

There appears to be no slowdown in the fall in wholesale gas prices, the report found, with values dropping 4 per cent in the past month alone.

The average day-ahead price for gas – the contract for gas delivery for tomorrow – is 28.35p/th (pence per therm) so far in April, it said.

This compares with an average price of 47p/th in April 2015. Wholesale gas prices have now fallen 49 per cent compared with the average monthly price recorded for April over the previous three years.

Vayu said this had a significant impact on the energy costs of many businesses in in the north purchasing gas on the wholesale market, particularly for users in the industrial and commercial segment.

Vayu senior energy analyst Gillian Lawler said European gas markets were experiencing a glut in low-priced gas with prices having fallen to lows not seen in ten years.

The drop in prices is a result of increased supplies from Russia and Norway combined with strong imports of LNG (liquefied natural gas) from the Middle East, she said.

“For the most part prices have been trading sideways recently, however this week there has been an increase on spot and future gas contracts, as a 22 per cent increase on Brent crude since the start of the month makes itself felt. The rise close to $46 per Brent barrel recently was driven by news that non-OPEC oil production could experience its biggest output fall in 25 years this year," said Ms Lawler.

“With weather becoming more of a factor from the end of April onwards, and a gradual increase in LNG deliveries expected during Q2, prices are expected to fall from where they are now.”

The report said the average wholesale price of electricity so far during April had been 28.45 £/MWh – a decrease of 29 per cent compared with April 2015 (40.15 £/MWh) and down 1 per cent compared with last month.

The drop in prices is attributed mainly to lower prices for gas, which is the main energy source used to generate electricity in Northern Ireland. A strong contribution of renewable sources such as wind has also been a significant factor.

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