June 2014: Wholesale gas prices remain 30% lower than the same time last year as a result of continued low demand, high storage levels and plentiful supply, according to the latest Wholesale Market Report from Vayu.
Temperatures throughout the UK are expected to remain at seasonal normal levels throughout July so demand in general is set to remain at or below seasonal norms, despite a small resurgence in electricity generation demand. Gas in storage in the UK market, which is the major source of gas supply into Ireland, is currently at 83% fullness, compared to 50% at the same time last year. With storage stocks so full, there are few options for where any excess gas in the UK can go.
Day-ahead prices – the contract for gas delivery for tomorrow – finished trading on Friday (27th June) at 39.25p, down almost 41% since the beginning of the year and just over 37% lower than at the same point in 2013. This weakness has also fed into the lower pricing of gas for the July-2014 contract and other contracts due to expire over the next three months.
Vayu’s senior energy analyst Joanne Daly says: “Storage stocks are so much higher currently and demand has been depressed which means we’ve seen a significant drop in gas prices year on year. While prices spiked briefly in mid-June on supply tightness and concerns over Russian gas supply, the market appears reluctant to move lower in anticipating the next event, but no upward pressure on prices is realistic. A key focus for traders now is whether or not supply will be curtailed in Q3 to meet the growing issue of tighter storage availability”.
“For gas contracts further out than one month, we’re also seeing prices being dragged down by the prospect of supressed summer demand due to reduced requirements for storage injections. This is positive news for many Irish businesses looking to take advantage of lower wholesale prices.”
The average wholesale electricity price so far in June is 5c/kWh – down 5% from the average during May and down 13% compared to this time last year. This is mainly due to the ongoing low price of gas, which is the main fuel used to generate electricity in Ireland.