Business

Wholesale gas prices fall 22 per cent year-on-year

Wholesale gas prices have fallen 22 per cent in the past year

ON-GOING over supply and weak demand has lead to a collapse in wholesale gas prices over the past year, according to Vayu Energy.

Its latest wholesale energy market report found a 22 per cent reduction in wholesale gas prices over the 12 months to August.

And wholesale electricity prices this month are 10 per cent lower than August last year, the firm said.

Vayu said the losses in wholesale gas prices were due to a "healthy supply" of gas while a drop in the price of oil had also contributed.

And prices were down 10 per cent over the month due to a the low demand for energy during the summer months.

Vayu energy said the average day-ahead price for gas, the contract for gas delivery tomorrow, is 31.09p/th (pence per therm) in August so far. This compares with an average price of 39.67p/th in August 2015.

The company's senior energy analyst Gillian Lawler said an abundant supply continues to be the main driver of gas prices for delivery next month.

And she said there "may be a further downside to winter prices as sterling continues to perform poorly against the euro".

"Updated storage figures show European stocks are extremely healthy," added Ms Lawler.

"In addition, the recent update from Centrica that its Rough storage facility, which houses 70 per cent of the UK's storage capacity, will have 20 wells available for withdrawals from November 1 is also good news.

"This accounts for twoo-thirds of wells at the facility, a significant improvement to earlier expectations of just four wells being available to year end.

“LNG (Liquified Natural Gas) deliveries have been disappointing however as producers have engaged in competitive tactics to bolster global prices. Cargoes have been diverted from Europe to keep prices elevated to avoid the LNG market crashing altogether.

"Continued output problems in some countries have added to the lack of arrivals to the UK. Qatar has been sending cargoes below market value to Japan and India, and the US is sending cargoes to non-European markets also.

"It looks like 16 per cent of global LNG production will have come to Europe by the end of 2016, below some forecasts. However, the deliveries into Europe are still up 20 per cent year on year.

“In the meantime, pipeline gas is making up for unpredictable LNG availability. The Norwegian Petroleum Directorate has increased expected natural gas demand for September. Supply from Norway has been key so far this year as LNG deliveries disappointed, and has out-produced its original forecasts for the year."

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