Russia-Ukraine Gas Deal – 26% Drop in Irish Wholesale Gas Prices in 2014

  • Irish wholesale gas prices down 26% since beginning of 2014
  • Russia-Ukraine deal resulting in drop in gas prices due to reduced risk premium
  • Gas inventories across major European hubs above 90% fullness

Friday, 31st October 2014: The natural gas supply deal reached between Russia and Ukraine has resulted in significant downward pressure on wholesale gas prices being traded today, according to Irish energy supplier Vayu.  When markets closed today, wholesale market contracts for next-day delivery were down 26% since the start of year, trading at 49.1p (down 2% compared to yesterday’s closing price).

Meanwhile, prices for within-day gas delivery are down 10% since markets opened today and contracts for delivery during the first quarter of 2015 are down 2%.

The deal, which will see Russia resume natural gas supplies into Ukraine during the winter period (up until March 2015) was brokered late on Thursday during tripartite talks between Russia, Ukraine and the EU. The deal means that Russian gas supplies delivered into other European countries via Ukraine are now more secure which is of significant importance given Russia provides approximately a third of EU’s gas demand, with half of that coming via Ukraine.

Joanne Daly, Senior Energy Analyst at Vayu states: “Since Russia stopped supplying Ukraine, the markets had factored a significant risk premium into wholesale gas prices at all major European gas hubs, including the UK wholesale gas market – which is the major source of gas supply into Ireland. With a deal now agreed between Russia and Ukraine, concern over winter supply is greatly reduced and we’re seeing a drop in prices in line with this with all contracts traded so far today falling in value.”

Ms Daly, notes that the removal of this risk premium means that the market is now almost entirely bearish with downward pressure on prices prevailing. The supply outlook is extremely positive, boosted by increased shipments of LNG (liquefied natural gas) and gas storage levels now above 90% fullness in the UK and across major European hubs.

“Over the coming winter, demand levels are broadly expected to be similar to last winter, which was below average,” says Ms Daly. “So, while there is always a risk of unplanned outages at key terminals, the general strong health of the system would minimise any impact on prices. With all this in mind it appears it would take a significant event to drive prices up for a prolonged period of time.”

ENDS

 

About Vayu

Vayu is a leading independent supplier of electricity, natural gas and renewables; offering the widest range of tailored procurement solutions to industrial and commercial customers in Ireland, the UK and the Netherlands. The company has been in operation since 2003 and since its beginnings as a business natural gas supplier has steadily grown and now supplies 22% of Ireland’s largest natural gas business users. Vayu’s customer now includes companies such as Tesco, Bulmers, FMC, IBM, and DHL among its growing client base.

In 2007, Vayu launched its electricity supply business and have seen our market share double each year. International commodity group Glencore Xstrata is the largest shareholder in the business.

We put ourselves in our Customers’ shoes, we always think about things from their point of view. Our experience and specialist energy expertise means we can quickly get to grips with what they’re looking for – and how best to deliver it

Vayu have Power Purchase Agreements (PPA’s) in place with developers of renewable energy projects including onshore wind, landfill gas, hydro and biomass. We understand the complexities of renewable projects – from the existing AER (Alternative Energy Requirement) projects and new REFIT arrangements to putting the right agreements in place between developers and financial institutions.

Vayu is one of a small number of licence power suppliers that can provide PPAs in both the Republic and Northern Ireland. Our industry knowledge, local knowledge, competitive terms and innovative approach mean that we are the ideal PPA partner for renewable generators for PPAs.

Over the past 10 years Vayu has gained a reputation for being “ahead of the game”, and we aim to keep it that way. We invest time and resources in anticipating trends and needs before they happen.

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